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1/4  BIBI* 


TWO  ESSAYS 


IN 


ECONOMICS 


BY 


JOHN  BORDEN 


CHICAGO. 

S.   A.   MAXWELL  &  CO. 

134-140  WABASH  AVE. 

1890. 


TWO  ESSAYS 


IN 


ECONOMICS 


BY 


JOHN  \BORDEN 


CHICAGO. 

S     A     MAXWELL  &  CO. 

134-140  WAHASH  AVK. 

1890. 


COPYRIGHT   1890. 
BY  JOHN  BORDEN. 


n  JE>  I  /  / 

•7 


CONTENTS. 

I.     WEALTH,  PAGES  i  to  75. 

II.      AMERICAN   MONEY,      PAGES  77  to  139. 


WEALTH. 

I. 

DEFINITION  AND  UNIT. 

According  to  the  common  and  general  opinion  anything 
is  wealth  which  admits  of  ownership  and  has  a  money  value. 
If  a  man  possesses  anything  which  has  no  money  value;  or,  in 
common  parlance  is  not  worth  a  cent,  it  is  not  wealth.  But  if 
he  can  sell  it,  he  infers  that  it  is  wealth  although  he  may  be 
ignorant  of  the  cause  of  its  value.  As  for  instance,  one  may 
gather  ginseng  and  sell  it,  and  therefore  regard  it  as  wealth ? 
although  he  may  have  no  knowledge  of  its  virtues — if  indeed 
it  has  any.  The  word  wealth  as  commonly  used  is  the  name 
given  to  each  one  of  a  class  of  objects,  which  answer  to  the 
above  definition  separately,  and  also,  to  the  entire  class  col- 
lectively. As  the  word  is  often  used  it  implies  abundance, 
affluence,  opulence,  riches;  but  quantities  are  comparative, 
and  under  the  definition  (Webster)  is  quoted  the  expression, 
I  have  little  wealth  to  lose  (Shaks).  Therefore,  it  is  proper 
to  use  the  word  to  designate  a  thing  as  wealth,  or  as  belong- 
ing to  a  class  of  objects  so  called,  whether  the  quantity  or 
value  of  the  article  is  great  or  small. 

The  above  definition  requires  that  all  objects,  which  are  en- 
titled to  be  called  wealth,  must  possess  a  value  common  to 
them  all,  and  which  is  called  money  value.  This  definitiony 
although  it  is  directly  deducible  from  the  actual  use  of  the 
word,  wealth,  demands  for  its  elucidation  an  explanation  of 
the  word  value,  and  especially  of  money  value. 

Anything  which  is  either  necessary,  useful,  or  agreeable  to 
a  man  has  value  to  him.  It  has  utility  to  him — utility  being 
the  state  or  quality  of  being  useful  (Webster).  The  man  has 
a  desire,  or  want  (a  demand)  and  the  thing  has  a  capacity  to 
satisfy  it  (a  supply).  Therefore,  the  thing  has  utility  to 
him;  it  possesses  in  itself  a  capacity  to  satisfy  his  desire  or 
serve  his  purpose,  and  he  furnishes  the  desire  or  purpose. 
Utility,  therefore,  expresses  a  relation  between  a  person  and 


2  WEALTH. 

an  object,  or  more  generally,  between  a  desire  or  purpose 
and  the  capacity  to  satisfy  it.  Use  value  or  value  in  use,  are 
phrases,  which,  as  defined  by  their  inventor  (Adam  Smith), 
express  or  signify  the  utility  of  the  object  or  thing  referred 
to.  If  a  thing  has  utility  it  has  a  use  value,  and  vice  versa. 
The  two  words  are  synonymous.  One  expresses  the  relation 
objectively  and  the  other  subjectively. 

In  order  that  utility  or  use  value  may  exist,  there  must  be  a 
desire  or  purpose  and  also  the  means  to  satisfy  it.  Water  has 
no  utility  to  quench  thirst  unless  there  is  thirst,  nor  fire  to 
ward  off  cold  unless  there  is  cold.  Food  has  the  capacity  to 
appease  hunger  if  it  exists — But  food  has  no  utility  or  use 
value  for  that  purpose  if  there  is  no  hunger.  By  chemical 
analysis  a  comparison  may  be  made  of  the  nutrition  contained 
indifferent  kinds  of  food.  And  thereupon  it  might  be  said  that 
one  kind  had  more  utility  for  that  purpose  than  another.  But 
although  horseflesh  may  be  as  nutritious  as  beef  or  mutton, 
yet  to  those  who  want  or  desire  the  latter,  they  have  a  greater 
use  value.  In  food,  and  in  everything  else,  the  consumer  ex- 
ercises his  choice,  and  the  thing  which  he  prefers  has  the 
greater  use  value  to  him  at  that  time.  The  intrinsic  prop- 
erties which  a  thing  has  or  is  supposed  to  have  and  which  en- 
able it  to  be  useful  would  continue  to  exist  if  mankind  were 
extinct,  but  in  such  case  the  thing  would  have  no  utility  or  use 
value  because  there  would  be  no  wants  to  satisfy. 

It  has  been  said  (Cairnes)  that,  utility  has  been  understood 
to  mean  the  quality  of  being  suitable  for  human  purposes 
generally,  and  the  degree  of  utility  to  be  measured  by  the  im- 
portance of  the  purposes  to  which  the  useful  commodity  min- 
istered; as,  that  water  is  more  useful  than  alcohol;  coal  than 
a  diamond;  and  iron  than  gold.  It  may  be  true  that  water 
is  more  useful  to  quench  ordinary  thirst,  or  for  washing,  cook- 
ing, irrigation  or  navigation  than  alcohol,  yet  the  latter  is 
more  useful  than  water  for  many  important  purposes  in  the 
arts  and  in  medicine.  Coal  may  be  more  useful  to  generate  heat 
than  diamonds,  and  the  latter  more  useful  to  cut  glass,  point 
a  mining  drill,  or  for  ornaments,  than  coal.  Iron  may  be 
more  useful  for  horse  shoes  and  many  other  purposes  than 
gold;  but  gold  is  more  useful  to  plug  a  decayed  tooth  and  for 
many  other  purposes  than  iron  About  the  comparative  im- 
portance of  many  of  these  uses  opinions  might  differ.  But 


WEALTH.  a 

it  is  obvious  that  the  above  meaning  loosely  given  to  utility 
is  too  indefinite  and  fails  to  bring  into  view  the  true  signifi- 
cance of  the  word;  because  "the  quality  of  being  suitable  for 
human  purposes  generally"  depends  upon  the  existence,  na- 
ture, and  amount  of  human  wants,  as  well  as  upon  the  capa- 
city to  satisfy  them. 

Since  utility  and  use  value  depend  for  their  existence  upon 
wants  (the  demand)  and  the  means  to  satisfy  them  (the  supply), 
and  both  of  these  vary,  then  it  follows,  that  utility  and  use 
value  are  variable  and  not  constant  quantities. 

The  capacity  to  be  useful  may  vary. 

1.  It  may  be  lost  in  whole  or  in  part,  the  food  may  spoil  or 
decay;  the  air  become  foul;  the  water  stagnant;  the  bouquet 
may  wither;  the  gem  become  cracked,  broken,  or  lose  its  lustre; 
the  watch  cease  to  keep  good  time;  and  the  goods  may  deterio- 
rate, get  out  of  style  and  become  old  stock.  The  capacity  to  be 
useful  may  not  exist  in  fact,  but  be  only  imputed  to  the  object; 
the  patent  medicine  may  not  be  a  panacea  in  reality;  nor  the  hair 
restorer  a  restorer  in  fact;  and  the  picture  or  gem  maybe  bogus. 

2.  The  quality  of  the  article  may  vary;  the  cloth  may  be 
homespun,  shoddy  or  fine  goods.     All  kinds  of    articles  vary 
through  all  degrees  of  quality. 

3.  The  quantity  may  vary.  The  supply  may  be  scant  or  the 
contrary.     Crops  may  be  short  or  over  abundant.     It  is  some- 
times reported  that  in  remote  localities  Indian  corn  is,  or  has 
been  used  for  fuel.     Although  the  corn  had  the  same  nutri- 
tive properties  and  would  make  as  much  whiskey,  glucose,, 
starch,  or  food,  as  if  it  were  in  the  greatest  demand  for  these 
purposes,  yet  situated  where  it  was,  the  corn  had  greater  util- 
ity to  its  owners  for  fuel  than  for  any  other  purpose.  The  capa- 
city to  satisfy  a  desire  or  serve  a  purpose  may  exist  in  excess 
of  the  desire  or  purpose  which  it  can  satisfy  or  serve.     In  such 
cases  the  utility  of  the  object  becomes  reduced  in  amount  as 
per  unit  of  quantity,  because  the  supply  exceeds  the  demand. 
If  a  farmer  raises  more  grain  than  he  can  possibly  consume, 
the  excess  has  no  utility  to  him  except  to  sell  to  others;  and 
if  there  are  no  buyers,  the  farmer  may  well   turn  his  grain 
into  fuel.     Commerce  confers  or  enhances  utilities  by  trans- 
ferring commodities   from  one   place  to   another,  and  thus 
bringing  the  supply  within  the  reach  of  an  adequate  demand. 


4  WEALTH. 

The  producer  receives  for  his  product,  on  the  average,  less  than 
one-half  of  the  price  paid  for  it  by  the  consumer.  Those  en- 
gaged in  trade  and  commerce  get  at  least  an  equal  share. 
Hence  the  wealth  gained  by  commerce. 

And  utilities  vary  as  wants  vary. 

1 .  They  vary  as  between  the  same  person  and  the  same  thing. 
A  man  may  be  more  hungry  or  thirsty  atone  time  than  another. 
Clothing  has  greater  utility  to  a  man  who  has  none,  than  if  he 
had  a  sufficient  supply  already ;  the  surplus  quantity  would  have 
little  utility  to  him  except  to  sell.  Thus  a  thing  may  vary  in 
utility  in  respect  of  the  purpose  for  which  it  is  wanted. 
Water  has  one  utility  to  quench  thirst  and  another  for  wash- 
ing or  cooking. 

2  They  vary  as  between  the  same  person  and  different 
things.  Either  food,  clothing,  shoes  or  drink  may  be  more 
useful  to  a  man  at  one  time  than  either  of  the  others. 

3.  They  vary  as  between    the  same   thing  and  different 
persons.     One  may  desire  food  or  drink  more  than  another. 
A  commodity  has  one  use  value  to  the  producer,  maker,  mer- 
chant or  dealer  and  another  to  the  consumer.     If  an  article  is 
saleable  at  a  profit,  that  constitutes  its  utility  to  the  dealer. 
If  the  article  thus  serves    his  purpose,  it  is  not  material  to 
him  what  use  value  alcohol,  tobacco,  opium  or  any  other  com- 
modity may  have  to  the  consumer. 

4.  They    vary  as  between  different   persons  and  different 
things      One  may  want   shoes  more  than   clothing,    and  an- 
other, just  the  reverse.     And  all  of    them  may  desire  money 
in  different  degrees  more  than  any  other  thing. 

Many  things  as  goods,  chattels,  lands,  etc.,  have  a  use  value 
to  many  persons  in  different  degrees  both  as  between  the 
things  themselves  and  also  as  between  the  several  persons. 
Hence  such  things  which  are  capable  of  delivery  or  transfer, 
become  exchangeable  between  those  persons  to  whom  they 
have  a  use  value,  because  of  their  greater  utility  to  one  or 
more  than  to  others.  Such  things,  therefore,  are  said  to  have 
exchange  value. 

From  the  foregoing,  it  is  inferrable  that  the  phrase,  use 
Talue,isthe  proper  generic  termfor  value,and  that  any  specific 
kind  must  be  use  value  in  some  modified  form  or  taken  in 
some  limited  or  qualified  sense.  If,  therefore,  all  kinds  of 
wealth  possess  a  kind  of  value  common  to  them  all  and  which 


WEALTH. 


may  be  called  wealth  value,  then  the  same  is  in  fact  use  value 
qualified  or  limited  in  some  way.  The  definition  of  wealth 
above  given  asserts  that  wealth  value  is  the  same  as  money 
value;  and  the  proof  of  it  is  as  follows: 

Since  wealth  may  be  more  or  less  in  quantity,  different  arti- 
cles and  quantities  of  wealth  admit  of  comparison  with  each 
other  as  to  their  amounts.  Therefore,  if  a  certain  article  or 
quantity  of  a  thing  which  is  in  fact  wealth  be  denoted  by,  d\ 
and  a  speci6c  article  or  quantity  of  some  other  thing  be  denoted 
by  w\  and  the  two  are  brought  into  comparison  and  it  appears 
thereby  that  the  two  articles  have  the  same  kind  of  value, 
then  it  follows  that  the  article  or  quantity,  w,  possesses  wealth 
value  and  is  therefore  wealth  also.  The  result  of  such  com- 
parison is,  that  the  two  articles  or  quantities,  w  and  d,  are  of 
equal  or  different  amounts  in  value,  which  relation  can  be 
expressed  algebraically  by 

w=v.d  (1) 

which  is  the,  same  as  to  say  that  the  article  or  quantity  w  is 
worth  or  possesses  a  wealth  value  v  times  as  great  as  the  arti- 
cle or  quantity  d. 

And  another  article  or  quantity  of  some  other  thing  denoted 
by,  z,  if  wealth,  gives  rise  to  the  relation  expressed  by 

z—v^.d  %    (2) 

and  so  on,  for  all  other  articles  or  quantities  which  may  be 
brought  into  comparison  with  d  and  thereby  found  and 
proved  to  be  wealth  also. 

In  this  manner  the  article  or  quantity  of  wealth,  d,  fur- 
nishes a  test  whereby  all  other  articles  of  wealth  may  be 
known  and  identified. 

And  the  article  or  quantity  of  wealth,  d,  also  furnishes  a 
unit  measure  of  wealth  and  wealth  value.  For  if  in  Eqs.  (1)  and 
(2)  it  be  assumed  that  iv=z=d.  then  v  =  y1=l.  That  is  to 
say,  if  the  specific  article  or  quantity  of  wealth,  d,  is  taken  as 
the  unit  of  wealth,  then  its  value  is  unity,  or  the  unit  of 
wealth  value. 

Now  suppose  the  two  articles  or  quantities  of  wealth,  w 
and  z,  were  directly  compared  with  each  other,  and  the  rela- 
tion between  them  were  found  to  be  as  expressed  by 


6  WEALTH. 

then  the  article  or  quantity,  w,  as  wealth,  is  v2  times  as 
great  as  the  article  or  quantity  z.  If  w  denoted  a  horse,  and 
z  a  sheep,  and  if  v2  =  10  then  the  relative  wealth  value  be- 
tween the  horse  and  a  sheep  would  be  as  one  to  ten.  And  an 
exchange  of  the  horse  for  the  sheep  might  take  place  upon 
that  basis.  The  owner  of  the  horse  would  consider  the  ten 
sheep  to  be  of  greater  utility  or  to  have  greater  use  value  to 
him  than  the  horse,  and  the  owner  of  the  sheep  would  con- 
sider the  horse  of  greater  utility  or  use  value  to  him  than 
the  sheep.  Hence  the  exchange.  In  this  and  every 
similar  case,  each  party  measures  for  himself  the  util- 
ity or  use  value  to  him  of  the  article  parted  with  and 
also  of  the  one  received.  And  in  his  opinion  he  has  gained, 
or  at  least  not  lost,  by  the  transaction.  Experience  might 
prove  that  both  were  correct  in  their  opinions,  or  that  one 
was  mistaken,  or  that  both  of  them  were.  So  that  in  ex- 
changes, both  parties  may  gain,  or  one  lose,  or  both. 

An  exchange  made  as  above  fixes  a  degree  of  exchange 
value  or  ratio  of  exchange,  between  the  article  exchanged. 
It  furnishes  a  measure  of  their  relative  utility,  but  only,  how- 
ever, as  between  the  parties  to  the  transaction.  Their  relative 
utility  might  be  estimated  very  differently  by  others;  and 
indeed  the  respective  use  value  to  two  other  persons,  both  of 
the  horse  and  the  sheep  might  be  very  different  from  that  to 
the  two  former  ones.  The  new  or  second  owner  of  the  horse 
might  refuse  to  exchange  him  for  less  than  eleven  sheep  or 
more;  or,  a  new  or  second  owner  of  the  sheep  might  refuse 
to  give  more  than  nine  sheep  for  the  horse.  And  the  degree 
of  exchange  value  or  ratio  of  exchange  of  the  horse  or  sheep 
would  vary  with  every  other  or  different  article  of  wealth 
with  which  either  might  be  exchanged,  and  also  with  every 
change  of  owners  of  each. 

Although  some  one  might  assert  that  water  is  more  useful 
than  alcohol;  coal,  than  adiamond;  and  iron,  than  gold;  yet  in 
an  exchange,  the  bystanders  have  no  part,  although  they  may 
volunteer  their  opinions.  The  parties  to  the  exchange  meas- 
ure the  utilities  involved  for  themselves.  And  each  of  them 
may  decide  that  for  equal  weights  or  quantities,  alcohol  is 
more  useful  than  water,  diamonds  than  coal,  and  gold  than 
iron;  at  least,  to  them  in  their  then  condition  and  circum- 
stances. 


WEALTH.  7 

It  seems  therefore,  that  those  things  which  have  utility  to 
more  than  one  person  and  are  transferable,  possess  exchange 
value;  and  that  the  degree  of  exchange  value  or  ratio  of 
exchange  existing  among  them  is  determined  by  the  ex- 
changes which  take  place  between  them. 

If  the  quantity,  d,  be  eliminated  between  Eqs.  (1)  and  (2), 
the  result  is 

w=vz.z= —.z:        v2=^-.  (4) 

vt  vt 

Thus,  the  test  and  common  measure  of  wealth,  c?,  furnishes 
also  a  medium  of  exchange  between  all  other  articles  or  quan- 
tities of  wealth.  For  in  the  case  above  supposed,  if  the  horse 
had  been  parted  with  for  100  d  and  the  ten  sheep  acquired 
for  10  dfeach,  then  the  ratio  between  the  horse  and  sheep  is  the 
same  as  that  above  supposed  to  exist  in  a  direct  exchange  made 
of  them. 

Anything  which  is  generally  conceded  to  be  wealth  and 
which  is  in  common  use  as  a  test  and  common  measure  of 
wealth  and  as  a  medium  of  exchange  is  called  money.  Such 
thing  need  only  to  be  wealth  among  those  who  use  it,  as  or- 
naments, etc.,  (Wampum),  or  it  may  be  gold,  silver,  copper 
or  other  metal.  All  money  is  composed  of  something  which 
is  wealth  among  the  people  who  use  it,  unless  for  convenience 
(small  change)  or  by  necessity,  force,  or  fraud,  something  else 
is  substituted  as  a  representative  or  token  for  it. 

If  money  were  made  out  of  something  which  had  no  value 
and  consisted  of  mere  counters,  then  it  could  not  be  said,  that 
wealth  consists  of  all  those  things  whose  value  can  be  meas- 
ured by  money.  For  if  the  money  had  no  value,  how  could  it 
measure  value  in  other  things?  Clearly  not  otherwise  than 
inferentially  by  effecting  exchanges  between  them.  Such 
money  would  in  that  manner  acquire  a  utility  for  that  purpose 
merely  by  reason  of  its  being  a  forced  currency. 

The  assertion  made  by  Eq.  (1)  is  that  w  is  worth  v  times 
as  much  as  d.  This  could  not  be  unless  d  had  value.  .  And 
the  Eqs.  (1),  (2)  and  (4)  show  that  the  operation  of  d  as  a 
medium  of  exchange  rests  logically  upon  the  averments  that 
the  value  of  w  is  v  times  greater  than  the  value  of  d,  and 
that  the  value  of  z  is  vl  times  greater  than  the  value  of  d. 
Therefore  all  mere  counters  used  as  money  are  representative 


WEALTH. 

of  something  which  is  in  fact  wealth,  or  if  not  they  are  cheats 
and  frauds  imposed  by  force  upon  an  unwilling  people. 

But  if    money   is  made  out  of  something  which  is  itself 
wealth,  and  especially  out  of    some    uniform    and    durable 
material  having  a  great  use  value  to  all  the  world  and  which 
remains  stable  and  permanent;  as  for  instance,  if  the  money 
be  made  out  of  gold  or  silver;    then  the    above   proof  that 
wealth   value    is   money    value   is    sound  and   correct.     And 
if    the    article     or   quantity,    d,    were     a    specific    amount 
by   weight   of    one    of    the    precious    metals,    then   it    be- 
comes, as  proved  by  common  use  and  experience,  a  fair  test 
and  unit  measure  of  wealth,  and  the  value  of  such  unit  be- 
comes the  unit  of  wealth  value.     If  wealth  consists  of  sundry 
things  possessing  utility,  or  of  the  utilities  themselves,  it  is 
obvious  that  it  is  measured  by  measuring  its  utility  or  value. 
Wealth  is  not  measured  by  measuring  its  weight,  or  its  super- 
ficial  or   cubic    contents.     As   wealth,     gold   measures    one 
amount  and  iron  or   lead   another.        As   between    different 
quantities  of  a  commodity,  all  of  the  same  quality,  as  for  in- 
stance, grain  or  cloth,  the  value  would  probably  increase  in 
proportion  to  the  quantity  within  certain  limits;  but  not  so  as 
to  different  amounts  of  the  same  article,  if  they  all  differed 
in  quality.     And  the  precious  metals  each  of  which  are  always 
uniform  in  quality  when  pure,  are  about  the  only  things  whose 
value  increases  regularly  in  proportion  to  quantity  to  an  unlim- 
ited extent.     Although  wealth  may  be  more  or  less  in  quan- 
tity, yet  its  amount  does  not  depend  upon  area,   magnitude 
or  specific  gravity;  a  lump  of  coal  does  not  measure  the  same 
amount  as  wealth,  as  a  diamond  of  the  same  size;  and  one 
horse  may  be  worth  many  times  more  than  another;  if  faster, 
stronger,  younger,  more  beautiful,  or  otherwise  more  desirable 
than  the  other.     Also  amounts  of  wealth  are  not  measured 
by  measuring  capacities  to  be  useful;  as  for  instance,  corn  so 
abundant  as  to  be  used  for  fuel;  or  fruit  so  abundant  as  to  be 
left  to  rot  on  the  ground;  or  sheep  in  Australia  when  nothing 
was  saved  except  the  fleece  and  tallow;   or   cattle  in  South 
America  and  elsewhere  when  nothing  was  saved  except  the 
hides,  horns  and  tallow.     And  when  Sinbad  got  into  the  pit 
or  cave  of  diamonds  their  capacity  to  be  useful  would  have 
figured  small  to  him,  if  he  had  not  found  a  means  of  escape. 

It  is  said  in  the  law  (2  Blacks.  Com.  446)  "A  sale  or  ex- 


AVEALTH. 


change  is  a  transmutation  of  property  from  one  man  to  another 
in  consideration  of  some  price  or  recompense  in  value;  for 
there  is  no  sale  without  a  recompense;  there  must  be  a  quid 
pro  quo.  If  it  be  a  commutation  of  goods  for  goods,  it  is 
more  properly  an  exchange',  but  if  it  be  a  transferring  of  goods 
for  money,  it  is  called  a  sale',  which  is  a  method  of  exchange 
introduced  for  the  convenience  of  mankind,  by  establishing  a 
universal  medium,  which  may  be  exchanged  for  all  sorts  of 
property;  whereas,  if  goods  were  only  to  be  exchanged  for  goods 
by  way  of  barter,  it  would  be  difficult  to  adjust  the  respective 
values,  and  the  carriage  would  be  intolerably  cumbersome. 
All  civilized  nations  adopted  therefore  very  early,  the  use  of 
money." 

In  a  sale  the  sum  of  money  paid  is  called  the  price  for  which 
the  thing  is  sold.  Its  money  or  wealth  value  is  thus  measured 
by  the  number  of  times  such  value  is  greater  or  less  than  the 
value  of  the  money  unit.  The  difference  between  the  price 
and  the  money  value  of  an  article,  is  the  difference  between  a 
sum  of  money  and  its  value.  If  the  money  is  of  the  right 
kind,  a  sale  is  in  substance  an  exchange,  in  which  each  party 
receives  full  satisfaction.  But  if  the  money  were  mere 
counters,  then  the  payment  of  money,  although  in  pointof  law 
it  would  operate  as  a  satisfaction,  in  reality  only  operates  as 
a  means  to  obtain  future  satisfaction  through  the  redemp- 
tion of  the  counters,  or  by  their  use  in  subsequent  pur- 
chases, provided  they  were  so  used  in  time  and  before  they 
lost  their  representative  or  putative  value. 

A  sale  measures  the  relative  utility  of  the  article  sold  and 
the  price  paid  for  it  to  the  buyer  and  seller  as  estimated  by 
each  of  them  for  himself.  The  sale  signifies  that  the  sum  of 
money  received  has  as  much  or  a  greater  use'value  to  the  seller 
in  his  opinion  than  the  article  sold;  and  also,  that  the  buyer 
considers  the  article  bought  as  of  equal  or  greater  use  value  to 
him  than  the  price  paid.  Each  party  works  for  his  own 
interest  in  the  transaction;  and  it  is  a  source  of  grief  to  ihe 
seller  to  learn  afterwards  that  he  might  have  sold  for  more 
and  to  the  buyer  that  he  might  have  bought  for  less.  The 
extreme  price  which  a  buyer  will  pay  for  an  article  is  a  sum 
of  money  whose  use  value  to  him  in  his  opinion  is  equal  to 
that  of  the  article  bought.  And  he  regards  all  forestalling, 
regrating,  engrossing  and  combinations  to  extract  a  famine 


10  WEA.LTH. 

price  out  of  him  as  unjust  and  illegal;  on  the  other  hand, 
the  lower  the  price  may  fall  the  better  it  suits  him.  As  to  the 
seller,  he  will  not  dispose  of  an  article,  unless  the  use  value  of 
the  price  paid  is  to  him  in  his  opinion,  at  least  equal  to  that 
of  the  article  sold.  If  such  article  is  a  surplus  product  to  him, 
or  of  no  utility  to  him  except  to  sell  he  has  a  wide  margin; 
but  the  shoe  pinches  at  any  price  below  its  cost  to  him.  If 
a  hatter  had  on  hand  a  stock  of  hats  he  could  not  use  more 
than  a  few  of  them  himself;  the  others  are  for  sale.  If  every- 
body chose  to  w^ear  caps  or  turbans,  the  surplus  stock  of  hats 
would  have  small  utility.  But  if  there  are  buyers,  the  higher 
the  price  the  better  it  suits  the  hatter.  If  there  is  competi- 
tion in  the  business,  or  for  any  cause  the  demand  falls  off,  the 
stock  is  liable  to  remain  upon  his  hands  and  deteriorate  in 
quality,  get  out  of  fashion  and  lose  style  and  polish.  As  time 
progresses,  he  is  ready  to  dispose  of  the  lot  on  hand  at  what 
he  calls  a  bargain.  If  his  entire  sales  renumerate  him  to  his 
satisfaction  he  continues  in  the  business. 

From  what  has  been  said  already,  it  must  be  apparent  that 
wealth  value  is  use  value  as  measured  in  barter  by  the  ex- 
change, and  in  sales  by  the  value  of  the  sums  of  money  paid. 
And,  since  barter  is  not  now  in  common  use,  the  general 
practice  among  all  men  is  to  estimate,  measure  and  compute 
wealth  and  its  value  in  terms  of  the  money  unit  and  its  value. 

Wealth  values  are  ascertained  by  market  prices,  of  which 
there  are  two  kinds,  wholesale  and  retail;  the  latter  less  fixed 
and  greater,  often  double  the  former.  And  there  are  different 
prices  both  wholesale  and  retail  at  different  times  at  the  game 
place,  and  also  at  different  places  at  the  same  time.  Any 
article  of  wealth  measures  one  amount  at  one  time  or  at  one 
place  and  a  different  amount  at  another  time  or  at  another 
place,  although  the  quantity  and  quality  of  the  article  may 
remain  the  same.  As  for  instance,  a  thousand  bushels  of 
grain,  regarded  as  wealth,  measures  one  amount  on  the  farm 
and  another  in  the  market,  and  also  different  amounts  at  either 
place  at  different  times.  The  farmer  who  sells  his  grain  at  a 
railroad  station  in  his  locality  gets  a  smaller  wholesale  price 
than  is  paid  for  the  grain  in  Xew  York,  Liverpool  or  other 
market.  And  so  in  like  manner  as  to  all  other  things.  And 
any  specific  article  is  likely  to  measure  one  amount  in  one 
sale  and  a  different  amount  at  a  prior  or  subsequent  one. 


WEALTH.  11 

A  market  tends  to  establish  continuously  one  price  at  one 
time  and  place  for  every  article  of  a  specified  grade  and 
quality  dealt  in  at  that  market.  One  set  of  dealers  represent 
Supply,  i.  e.  a  supply  of  a  commodity  and  a  demand  for 
money;  another  set  represent  Demand,  i.  e.,  a  demand  for 
the  commodity  and  a  supply  of  money.  And  the  market 
is  composed  of  buyers  and  sellers. 

The  market  price  is  arrived  at,  by  an  equation  between  the 
demand  and  supply,  both  of  which  are  continually  affected  by 
a  variety  of  causes,  real,  speculative  or  imaginary.  And  the 
equation  is  brought  about  substantially  as  follows:  The 
amount  of  a  demand  has  a  relation  to  the  price  bid;  so  also,  the 
amount  of  the  supply  to  the  selling  price.  Hence  if  the  quantity 
demanded  of  an  article  be  denoted  by  D  at  the  price  vl.d 
per  unit  of  quantity,  d  being  the  money  unit;  then  the 
total  cash  amount  of  the  demand  is  D.v^.d.  And  if  the 
quantity  of  the  same  article  offered  for  sale  at  the  price  v.d 
per  unit  of  quantity  be  denoted  by  $,  then  the  total  cash 
amount  of  the  supply  is  S.v.d.  Now  the  quantity  demanded 
varies  or  tends  to  vary  inversely  with  the  price  vl ,d\  and 
the  amount  of  the  supply  varies  or  tends  to  vary  directly 
with  the  price  v  d.  And  transactions  occur  when 

S.u.d.=D.vl.d  (5) 

The  total  quantity  bought  and  sold  is  the  same  and  at  the 
same  price.  At  this  point  any  quantity  large  or  small  may 
change  hands.  If  the  demand  at  that  price  is  in  excess  of  the 
supply  it  avails  nothing;  the  only  way  to  increase  the  supply  is 
to  bid  up  the  price.  Then  the  additional  supply  would  sat- 
isfy the  most  urgent  demand,  whereupon  it  would  become  less 
and  the  price  bid  would  consequently  relapse.  On  the  other 
hand  an  excess  of  supply  avails  nothing  after  the  demand  is 
satisfied  unless  the  price  is  lowered.  This  would  excite  an 
additional  demand  which  would  reduce  the  amount  of  the 
supply,  upon  which  the  price  rises  and  then  the  demand  falls  off 
and  the  price  relapses.  Thus  the  market  price  continually 
fluctuates  in  unstable  equilibrium. 

Market  prices  at  the  leading  markets  of  the  world  fix  ap- 
proximately all  wealth  values  of  the  chief  or  staple  commo- 
dities for  the  benefit  of  all  concerned,  whether  producers, 


1 2  WEALTH. 

dealers,  or  consumers.     And  the  wholesale  price  of  an  article 
is  often  quoted  to  the  fraction  of  a  cent,  penny,  etc. 

If  any  one  brings  an  article  to  market  this  implies  that 
to  him  it  is  a  surplus  product  or  that  it  has  a  less  use  value  to 
him  than  its  price.  He  may  have  made  or  manufactured  it  if 
a  producer,  or  if  a  dealer  he  may  have  bought  it  previously 
in  order  to  sell  again.  In  every  case  it  costs  him  a  certain 
amount  in  money  or  in  money's  worth.  Unless  the  price  real- 
ized exceeds  this,  his  livelihood  is  affected,  or  at  the  very 
least  his  profits.  If  the  article  is  not  wanted  at  all  or  is  a 
"drug"  in  the  market,  it  is  in  vain  for  the  seller  to  expatiate 
upon  its  capacity  to  be  useful,  or  upon  its  cost  to  him.  The 
buyer  considers  in  connection  with  it  the  use  value  of  his 
money  to  him,  for  that  represents  his  livelihood  and  his  profits 
made  and  to  be  made.  If  the  article  is  wanted  then  its  price 
is  affected  by  the  quantity  of  the  commodity  which  is  offered 
for  sale  and  the  quantity  of  money  which  buyers  are  ready  to 
invest  in  it.  And  a  sale  takes  place. 

1.  When  the  seller  thinks  he  cannot  obtain  more  from  the 
the  buyer  with  whom  he  is  dealing,  or  from  any  other. 

2.  When  he    wants   the    price   more    than    he  wants  the 
article. 

3.  When  the  buyer  thinks  that  he  cannot  buy  the  article 
for  less  from  the  seller,  or  any  one  else. 

4.  When    he  wants  the  article  more    than  he  wants  the 
price. 

Every  sale  is  a  separate  transaction,  but  it  is  one  of  many 
which  go  to  make  up  what  is  called  the  market  price,  which 
is  an  average.  x  The  man  who  sells  at  the  highest  price  and 
buys  at  the  lowest  is  the  "smart  man,"  the  successful  dealer. 
In  a  market  everyone  is  on  the  alert  to  do  the  best  he  can; 
for  success  in  life  or  business  awaits  the  final  result. 

There  are  not  only  "sales"  but  "contracts  to  sell."  A  sale 
occurs  where  the  seller  has  the  article  on  hand.  A  contract 
to  sell  is  where  the  seller  expects  to  procure  the  article  before 
the  time  stipulated  for  its  delivery.  As  for  instance  the  Gov- 
ernment advertises  for  supplies  for  the  army,  navy,  etc.,  to  be 
delivered  at  certain  places  at  certain  times  or  from  time  to 
time,  and  contractors  bid  and  afterwards,  if  successful,  procure 
the  articles  required. 


WEALTH. 

In  a  market,  some  dealers  sell  for  future  delivery,— 
sell  short;  because  in  their  opinion  the  price  will  fall  in 
the  meantime.  These  men  are  the  bears;  they  work  in 
the  interest  of  the  consumer.  Others  buy  for  future  de- 
livery because  in  their  opinion  the  price  will  rise;  they  are 
the  bulls;  they  work  in  the  interest  of  the  producer.  The 
bears  also  sell  for  immediate  delivery  in  order  to  break 
down  the  market  price;  the  bulls  buy  for  cash  and  some- 
times get  overloaded;  and  sometimes  they  corner  the  bears:— 
when  the  time  comes  to  deliver,  "the  shorts"  find  that  the 
other  side  has  monopolized  the  supply,  and  put  up  the  price. 

The  benefit  conferred  upon  the  community  by  a  market  and 
especially  by  the  professional  dealers  therein,  may  be  illus- 
trated by  an  example.  Many  years  since,  a  person,  then  a 
young  man  tried  farming.  The  crop  was  raised  and  for  sale. 
On  enquiring  the  price  he  was  told  that  corn  was  worth  from 
twenty  to  twenty-five  cents  a  bushel.  On  looking  about  for  a 
buyer,  he  found  one  at  the  higher  price  who  would  buy  on  credit. 
The  sale  was  made  and  the  corn  delivered — and  it  was  never 
paid  for.  Then  there  were  no  boards  of  trade,  nor  bulls  nor 
bears.  Now  the  price  of  corn,  or,  indeed,  of  any  commodity, 
is  fixed  in  a  market  to  the  fraction  of  a  cent  for  cash  or  future 
delivery.  The  farmer  may  sell  his  grain  for  cash  or  at  price 
already  well  fixed  and  settled  for  future  delivery  and  receive 
cash  on  delivery  for  any  amount  he  may  have  to  sell  no  mat- 
ter how' great.  That  is  to  say,  the  farmer  can  sell  his  grain 
ahead  and  deliver  it  afterward.  The  so  called  "Farmers' 
Alliance"  is  opposed  to  all  dealing  in  futures.  After  the 
farmer  is  in  the  market  with  his  products  he  must  sell. 
And  in  an  early  day  in  Chicago,  he  sold  for  truck  and 
trade,  and  was  at  the  mercy  of  the  buyer.  It  would  be 
absurd  to  say  that  a  miller  who  made  thousands  or  even 
hundreds  of  barrels  of  flour  per  day  should  not  be  allowed 
to  contract  ahead  for  barrels,  sacks,  grain,  etc.  The  person 
above  referred  to,  lately  asked  a  farmer  located  hundreds  of 
miles  away  from  Chicago,  how  he  knew  what  price  he  ought 
to  receive  for  grain,  cattle,  hogs,  etc.  And  the  reply  was 
that  we  get  the  Chicago  market  reports.  The  "Farmers'  Al- 
liance" would  have  the  market  consist  exclusively  of  bulls. 

If  one  versed  in  political  economy  should  propose  to  oper- 
ate in  a  market,  as  for  instance  in  grain;  after  he  had  fixed 


14  WEALTH. 

upon  its  natural  or  just  price  by  a  reference  to  the  amount  of 
labor  required  for  its  production,  or  the  amount  of  labor 
which  it  would  command  in  exchange,  or  the  amount  of  labor 
which  it  would  maintain,  or  in  any  manner  estimate  the  cost 
of  its  production,  it  would  be  necessary  for  him  also,  pre- 
viously to  consider  the  state  of  the  market  as  to  the  demand 
and  supply  and  "facts"  like  the  following  taken  from  a 
Chicago  newspaper  of  date  March  23,  1890. 

"Late  yesterday,  May  wheat  (No.  2  Spring)  sold  on  the  curb 
at  80|c.  "Puts"  were  quoted  at  80£  @  80jc,  and  "calls"  at 
80£  to  81c.  G.  K.  &  H's.  private  wire  dispatch  from  New 
York  reported  the  clearance  from  four  ports  for  the  week  at 
641,800  bu.  of  wheat,  2,890,750  bu.  corn,  281,600  pkgs  of  flour, 
and  417,850  bu.  of  oats.  These  figures  show  an  increase  for 
the  week  in  wheat  of  82,750  bu. 

W.  G.  Me  C.  &  Co.  say  :  Every  indication  shows  that  the 
shorts  in  wheat  are  about  covered  and  that  the  buying  of  the 
last  twenty-four  hours  has  been  almost  exclusively  for  long 
account.  We  look  for  still  further  reaction  Monday,  but 
would  buy  on  all  breaks. 

C.  B.  Co.'s,  market  letter  says:  Our  market  closed  heavy 
at  bottom  prices,  with  the  shorts  well  covered.  New  York  as- 
sures us  there  is  little  probability  of  further  large  clearances  for 
some  time  to  come,  and  crop  damage  reports  are  contradicted 
or  said  to  be  local  and  insignificant,  while  the  idea  of  mani- 
pulation is  less  generally  believed;  and  our  own  examination 
into  the  matter  induces  us  to  think  that  there  is  no  line  of 
long  wheat  held  by  any  man  or  any  set  of  men  who  can,  with 
their  present  holdings,  control  prices.  The  country  are  quite 
bullish  and  have  made  some  money  on  the  up  turn,  and  those 
who  have  sold  out,  will  for  a  time  buy  back  on  the  breaks,  but 
it  looks  to  us  as  if  the  up  turn  had  reached  its  summit,  and 
the  general  tendency  for  the  coming  week  will  be  in  the  di- 
rection of  lower  prices. 

G.  K.  &  H.'s  market  letter  of  Saturday  says:  Reports  of 
damages  to  the  wheat  crop  continue  to  come  in,  but  now  that 
the  short  interest  has  covered  so  freely,  they  have  temporarily 
le>s  influence.  A  further  downward  reaction  seems  probable, 
for  the  immediate  future.  Thereafter  we  look  for  renewed 
1  (living  and  improvement  based  on  good  cash  demand  for  old 
wheat,  or  on  crop  scares,  or  both. 


WEALTH.  15 

The  shipments  of  rye  from  Russia  from  Aug.  1  to  Feb.  22 
were  about  21,436,000  bu.,  against  38,216,000  bu.  for  the  cor- 
responding time  in  1888-9. 

English  farmers'  wheat  deliveries  the  last  week  were  81,271 
qrs.  the  average  price  being  29s.  8d. 

The  quantity  of  wheat  in  bond  in  the  French  ports  March  1 
was  estimated  at  4,000,000  bu.  as  against  11,440,000  bu. 
March  1,  1889. 

Beerbohm  of  March  7  says:  The  stock  of  wheat  at  Odessa 
is  variously  estimated  at  from  4,000,000  to  8,000,000  bu.,  but 
there  is  no  official  or  entirely  reliable  return;  seeing,  however, 
that  the  official  stock  Jan.  1  was  11,328,000  bu.,  the  present 
stock  is  probably  not  far  short  of  8,000,000  bu. 

The  receipts  of  flour  and  grain  at  Chicago  for  the  week 
just  closed  were  equal  to  3,804,373  bu.  and  the  shipments 
equal  to  2,877,000  bu. 

Statistician  Dodge  in  his  March  report  to  the  agricultural 
department  says  the  impoverished  condition  of  American 
farmers  is  due  to  overproduction. 

Beerbohm  of  March  7  says:  The  crop  reports  from  the 
Punjab  are  by  no  means  favorable,  and  it  is  now  pretty  clear, 
taking  into  account  the  largely  reduced  acreage,  that  like  last 
season,  India  will  be  a  comparatively  small  contributor  to  the 
world's  wheat  supply. 

Clearances  of  wheat  from  New  York  Friday  were  67,571 
bu.  to  Oporto  and  222,902  bu.  to  Lisbon. 

Minneapolis  millers  complain  of  the  poor  demand  for  flour. 

The  shipments  of  wheat  from  Russia  from  Aug.  1  to  Feb. 
22  were  about  44,784,000  bu.  against  62,192,000  bu.  for  the 
corresponding  period  in  1888-9. 

The  London  Daily  Chronicle  of  March  3,  says:  The  ravages 
of  rust  on  the  wheat  crop  has  been  more  severe  than  was  at 
first  anticipated.  It  is  estimated  that  in  South  Australia,  the 
loss  to  the  farmers  amounts  to  at  least  $5,000,000;  in  Victoria, 
$2,500,000  to  '$3,000,000;  and  in  New  South  Wales  to  $2,- 
500,000. 

Bradstreet  says:  There  is  a  strong  point  worth  noting. 
July  l,  1889,  stocks  in  the  United  States  were  at  a  low  ebb, 
and  not  up  to  the  customary  average  abroad.  As  a  matter  of 
fact,  the  grand  total  of  available  wheat  stocks  in  this  country, 
plus  stocks  of  wheat  afloat  for  Europe,  United  Kingdom 


16  WEALTH. 

stocks  at  Odessa,  French  ports,  Paris,  Berlin,  Danzig  and 
Stettin  amounted  on  July  1,  1 889,  to  67,328,000  bu  ascompared 
with  83,792,000  on  the  like  date  in  1888.  March  1,  1890,  the 
grand  total  of  American  and  European  stocks  and  stocks 
afloat  for  Europe  were  95,842,000  bu.  and  had  been  declining 
for  two  months  at  the  rate  of  10.000,000  bu.  per  month.  If 
this  rate  of  decline  be  continued  during  the  four  months  end- 
ing June  30  next,  the  indicated  total  of  American,  European 
and  afloat  stocks  at  that  date  is  56,000,000  of  wheat,  or  11,- 
000,000  bu.  less  than  on  July  1,  1889." 

If  one  should  decide,  from  snch  reports  or  otherwise,  that 
the  relation  between  the  supply  and  demand  would  justify 
either  buying  or  selling  he  would  easily  flnd  others  ready  to 
accommodate  him. 

In  view  of  what  precedes  it  appears,  that  the  money  test  and 
measure  of  wealth,  in  common  use  everywhere,  stands  upon 
correct  logical  and  scientific  grounds.  And  this  result  is 
reached  by  practical  men  without  any  abstract  speculation  or 
metaphysical  inquiry  beforehand,  into  the  nature  and 
causes  of  value,  or  any  search  at  all  into  the  subtle  motives 
of  human  desire.  After  the  different  kinds  of  wealth  are 
known,  the  nature  and  causes  of  their  value  can  be  correctly 
investigated. 

It  is  not  necessary  in  order  to  find  a  correct  definition  or 
test  of  wealth  among  civilized  men  to  go  back  to  an  age  when 
they  were  too  savage  to  know  the  use  of  money  and  the  dif- 
ferent kinds  of  wealth  were  ascertained  by  barter.  According 
to  this  theoretical  mode  of  defining  wealth,  it  is  said  to  consist 
of  those  useful  and  agreeable  things  which  are  exchangeable 
with  each  other.  Barter  is  not  now  in  common  use  anywhere 
except  among  savages,  and  it  cannot  furnish  any  units  of  wealth 
and  value.  Since  Economics  deals  with  quantity,  it  requires 
its  units  of  common  measure.  Practical  men  have  measured 
wealth  and  value  by  means  of  the  money  unit  ever  since  barter 
was  disused  and  money  adopted  as  a  medium  of  exchange. 
And  this  method  agrees  with  the  mode  generally  adopted  in 
mensuration,  i.  e.  to  take  a  specific  quantity  of  the  thing  to  be 
measured  as  the  unit  of  measure;  as,  in  length,  a  foot;  in 
weight,  a  pound:  in  capacity,  a  bushel,  etc. 

It  is  said  (Mill,  Book  3,  Chap.  1),  "The  word  value  when 
used  without  adjunct  always  means  in  political  economy,  value 


WEALTH.  17 

in  exchange,  or  exchange  value"  *  *  *  "or,  the  value,  or  ex- 
change value,  of  a  thing  means  its  general  power  of  purchas- 
ing; the  command  its  possession  gives  over  purchasable  com- 
modities in  general  " 

Now — ignoring  money— what  is  the  general  purchasing 
power  of  a  bushel  of  wheat?  In  the  first  place  there  are 
many  kinds  and  qualities,  as,  winter  and  spring:  red  and 
white;  good  and  poor  of  all  grades.  Wool  is  said  to  be  sold  in 
London,  which  is  its  great  market,  in  over  one  hundred  grades. 
Coffee  may  be  Mocha,  Java,  Rio,  Santos,  etc.,  of  all  qualities. 
Lumber  or  timber  may  be  sawn  or  unsawn,  and  of  rosewood, 
mahogany,  teak,  oak,  pine,  etc.  Horses  and  cattle  may  be  of 
all  grades  and  qualities;  and  so  also  of  all  other  commodities. 
If  barter  were  relied  upon,  it  could  be  learned  that  wheat 
was  exchangeable  and  therefore  had  exchange  value,  and 
little  or  nothing  more.  If  a  large  number  of  horses  were 
exchanged  with  each  other,  the  ratio  of  exchange  of  each  horse 
with  each  of  the  others  would  probably  differ  in  each  case,  and 
therefore  the  amount  of  boot  given  and  taken  in  each  case 
would  be  different.  In  the  absence  of  money,  the  boot  would 
consist  of  sundry  articles  whose  relative  values  would  remain 
undetermined.  Hence  the  degree  of  the  exchange  value 
of  each  horse,  and  the  average  exchange  value  of  all  the  horses 
would  remain  unknown.  And  if  they  were  exchanged  sing- 
ly or  in  lots,  for  other  commodities  all  variable  in  kind  and 
quality,  nothing  could  be  known  of  the  general  purchasing 
power  of  any  of  the  articles  exchanged.  It  would  be  impos- 
sible to  conduct  business  upon  the  basis  of  exchange  value. 
The  adoption  of  barter  would  be  return  to  barbarism.  Any- 
thing in  the  shape  of  money  is  more  tolerable  than  barter. 

Where  money  is  in  use,  by  means  of  a  study  of  the  market 
reports,  the  ratio  of  exchange  of  a  bushel  of  a  specific  kind 
wheat,  as  say  No.  2  Spring,  with  specific  amounts  of  other 
graded  articles  might  be  figured  out.  A  table  of  these  ratios 
might  be  said  to  exhibit  the  general  purchasing  power  posses- 
sed by  a  bushel  of  No.  2  Spring  wheat.  And  if  the  price  of 
an  average  bushel  of  wheat  were  obtained  from  the  prices 
of  all  the  different  kinds  which  might  be  quoted;  and  the 
same  method  were  pursued,  with  rye,  oats,  barley,  wool,  cof- 
fee, lumber,  live  stock,  cloth,  tea,  etc.,  etc..  then  the  general 
power  of  purchasing  of  an  average  bushel  of  wheat  as  com- 


18  WEALTH. 

pared  with  an  average  of  other  commodities  might  be  ascer- 
tained. And,  supposing  corn  in  England  to  mean  wheat, 
rye,  barley,  oats,  pease  and  beans,  and  a  bushel  or  a  quar- 
ter of  corn  to  mean  a  specific  quantity  of  each,  the  price  of 
an  average  bushel  or  quarter  of  English  corn  might  be  ob- 
tained from  the  market  reports,  and  its  general  purchasing 
power  thus  arrived  at.  But  in  barter  and  in  the  absence  of 
money,  it  would  not  be  easy  to  fix  for  a  quarter  of  average 
English  corn,  or  for  a  specific  amount  of  any  other  commodity 
"the  command  its  possession  would  give  over  purchaseable 
commodities  in  general." 

The  attempt  to  ignore  money  value  and  to  reason  in  poli- 
tical economy  upon  the  basis  of  exchange  value  has  not  tended 
toward  either  certainty  or  simplicity.  It  is  said  (Mill,  Book  3, 
Chap.  1),  "When  we  are  considering  the  causes  which  raise 
or  lower  the  value  of  corn,  we  suppose  that  woolens,  silks,  cut- 
lery, sugar,  timber,  etc.,  while  varying  in  their  power  of  purchas- 
ing corn,  remain  constant  in  the  proportions  in  which  they 
exchange  for  one  another.  On  this  assumption,  any  one  of 
them  may  be  taken  as  a  representative  of  all  the  rest;  since 
in  whatever  manner  corn  varies  in  value  with  respect  to 
anyone  commodity,  it  varies  in  the  same  manner  and  degree 
with  respect  to  every  other,  and  the  upward  or  downward 
movement  of  its  value  estimated  in  some  one  thing,  is  all  that 
needs  be  considered.  Its  money  value,  therefore,  or  price, 
will  represent  as  well  as  anything  else  its  general  exchange 
value,  or  purchasing  power;  and  from  an  obvious  convenience 
will  often  be  employed  by  us  in  that  representative  character; 
with  this  proviso,  that  money  itself  does  not  vary  in  its  gen- 
eral purchasing  power,  but  that  the  prices  of  all  things  other 
than  that  which  we  happen  to  be  considering  remain  un- 
altered." 

Practical  men  in  their  actual  dealings  with  wealth,  and  in 
"speculating"  in  it  or  about  it,  have  found  an  obvious  conven- 
ience in  selecting  money  as  "a  representative  of  all  the  rest" 
in  all  cases;  especially  as  the  relative  values  of  other  things 
are  readily  deducible  therefrom  and  are  not  obtainable  from 
any  other  source.  Money,  if  composed  of  one  of  the  precious 
metals,  is  uniform  in  the  quality  of  its  material,  durable, 
limited  in  supply,  and  comparatively  stable  in  its  use 


WEALTH.  19 

value;  whereas,  woolens,  silks,  cutlery,  sugar,  timber,  etc.,  are 
of  all  grades  and  qualities,  and  continually  deteriorating  and 
altering  in  quantity,  quality,  and  value.  Even  as  to  (English) 
corn,  one  crop  may  be  of  good  quality,  well  harvested,  and 
not  grown  musty  or  eaten  by  the  weevil;  another  crop  might 
be  short  in  quantity  and  of  poor  quality,  rusty,  damaged  by 
wet  in  the  harvest,  etc.  There  are  many  kinds  of  "woolens, 
silks,  cutlery,  sugar,  timber,  etc.,"  and  also  a  great  difference 
between  new  and  old  stock;  whereas,  the  currency  is  all  alike 
and  usually  is  not  continually  becoming  moth  eaten,  rusty, 
wormy  or  rotten.  Hence  from  an  "obvious  convenience" 
land,  labor,  capital,  wages,  interest,  profits  and  all  wealth  are 
estimated  and  measured  in  money.  Both  national  and  indi 
vidual  wealth  are  always  so  estimated  and  computed  for  all 
purposes.  And  the  degree  of  exchange  value,  general  ex- 
change  value  or  purchasing  power  of  "woolens,  etc.,"  is  only 
known  by  a  reference  to  prices. 

The  use  value  of  money  is  affected  by  its  abundance  or 
scarcity; a  great  inflation  of  the  currency  depreciates  its  value, 
while  a  contraction  has  the  contrary  effect.  Gold  and  silver 
both  have  a  use  value  in  the  arts  and  for  ornament  as  well  as 
for  money.  Their  use  value  as  money  has  been  greatly  im- 
paired by  the  use  made  of  paper  money  and  all  the  various 
forms  of  credit.  And  their  value  has  been  no  doubt  greatly 
affected  in  both  respects  by  their  increase  in  quantity.  This 
was  very  noticeable  lately  in  the  decline  in  the  value  of 
silver  from  1873  to  1890;  and  both  of  the  precious  metals  are 
said  to  have  declined  greatly  in  value  relative  to  other 
things  since  the  discovery  of  America. 

The  supply  of  the  precious  metals  is,  quite  limited  and  the 
demand  very  uniform  and  their  stability  in  value  is  sufficient 
for  the  great  mass  of  transactions  which  cover  only  short 
periods  of  time.  Therefore  it  is  not  material  whether  gold  or 
silver  was  worth  more  or  less  in  the  Middle  Ages  or  even  a 
generation  ago  than  now.  If  the  currency  and  standard  are 
continually  tampered  with,  then  the  case  is  altered.  Long  con- 
tracts -are  very  seriously  affected  by  alterations  made  in  the 
amount  of  money  and  the  size  of  the  standard. 
:  And  from  one  point  of  view,  it  might  be  said  that  money 
is  always  changing  its  value.  For  if  a  man  had  money  and 


20  WEALTH. 

no  clothes,  the  money  would  have  less  use  value  to  him  rela- 
tive to  clothes  than  if  he  had  an  abundance  of  the  latter. 
And  the  continual  variation  in  market  prices  may  be  regarded 
as  the  effect  of  the  continually  varying  relation  in  the  use 
value  of  commodities  to  buyers  and  sellers  respectively  as 
compared  with  that  of  the  money  paid  for  them. 

Whether  the  wealth  value  of  the  money  unit  is  invariable 
or  not  it  is  in  practice  assumed  to  be  so  and  no  better  measure 
of  wealth  has  ever  been  invented  or  discovered. 
.  Wealth  value  is  not  co-extensive  with  use  value;  for  the 
latter  may  exist  without  giving  rise  to  the  former.  As 
for  instance,  air  has  great  use  value,  but  no  wealth  value. 
The  quantity  of  air  is  unlimited;  it  is  not  the  subject  of 
ownership  and  therefore  cannot  have  exchange  value. 
If  a  thing  is  wanted  or  needed  and  can  be  had  for  noth- 
ing it  has  no  wealth  value.  And  if  a  commodity  is  exces- 
sively abundant  its  wealth  value  becomes  small  per  unit 
of  quantity.  A  thing  which  is  not  wanted  at  all,  has  no  value. 
Wealth  therefore  does  not  consist  in  an  abundance  of  useful 
things, — unless  they  are  wanted.  Some  people  would  not 
regard  a  great  abundance  of  wooden  shoes  as  wealth.  And 
any  amount  of  capacity  to  be  useful  no  matter  how  great,  has 
no  wealth  value  and  indeed  no  use  value  in  the  total  absence 
of  all  want.  If  a  race  of  anchorites  should  go  naked,  live 
in  caves  or  holes  and  subsist  upon  roots  and  herbs,  their 
wealth  would  be  small  although  roots  and  herbs  and  holes  in 
the  ground  might  be  abundant.  If  all  men  were  like  Diogenes 
there  would  be  great  utility  in  tubs  and  small  utility  in  every 
thing  else  except  sunshine . 

Wealth  value  being  the  same  as  exchange  value,  its  quantity 
and  therefore  the  quantity  of  wealth  is  measured  by  and  in 
terms  of  the  value  of  the  money  unit.  An  abundance  of  com- 
modities which  are  wanted  and  which  sell  for  a  high  price 
constitute  an  abundance  of  wealth. 

Besides  value,  there  is  another  element  in  wealth,  and  that 
is  ownership.  There  must  be  an  exclusive  right  to  possess 
and  enjoy  the  object  of  desire.  Water,  air  and  sunlight  have 
utility,  but  ordinarily  no  wealth  or  money  value.  Mineral 
water,  gas-light  and  electric  light  have  such  a  value,  because 
they  are  property  and  admit  of  exclusive  ownership.  If  a 


WEALTH.  21 

man  could  get  water  and  light  by  simply  turning  them  on 
without  any  charge,  their  utility  would  be  the  same  as  if  they 
had  to  be  paid  for.  It  is  of  the  essence  of  wealth  to  be  a 
monopoly.  The  seller  has  a  supply  of  capacity  to  be  useful, 
viz,  a  commodity,  and  his  want  is  money;  this  belongs  to  the 
buyer  who  wants  in  lieu  of  it,  the  commodity.  Every  sale  or 
exchange  implies  a  right  to  make  the  transfer.  The  buyer 
would  give  nothing  for  an  article  which  he  could  take  with- 
out pay.  The  employer  would  not  pay  wages  if  the  laborer 
was  compelled  to  work  for  nothing.  No  one  would  pay  in- 
terest, if  capital  could  be  had  for  nothing;  nor  would  land  pro- 
duce rent  if  everybody  was  free  to  occupy  it.  Wealth  value  is 
a  monopoly  value;  for  nothing  is  wealth  unless  it  is  also  prop- 
erty; and  the  exclusive  command  or  possession  of  a  thing  is 
of  the  essence  of  property  or  ownership.  In  fact,  the  word 
wealth,  is  of  ten  used  as  synonymous  with  possessions  and  prop- 
erty (Webster).  An  article  of  property  may  lose  its  capacity 
to  be  useful,  by  use  and  wear,  or  decay,  or  other  loss  of  its 
intrinsic  properties;  or  it  may  become  old  stock,  out  of  fash- 
ion, or  otherwise  lose  its  value  by  a  change  in  wants  or  de- 
sires. In  all  such  cases  the  article  would  still  be  property, 
but  it  would  cease  to  be  wealth  if  for  any  cause  it  entirely 
lost  the  element  of  value. 

And  the  value  of  an  object  sinks  unless  it  can  be  enjoyed  in 
peace  and  security.  Utility  vanishes  if  a  sword  is  suspended 
over  the  head  of  its  possessor  by  a  hair.  It  is  related  of  the 
philosopher,  Aristippus,  that  once  he  was  at  sea,  and  seeing  a 
pirate  ship  at  a  distance  he  began  to  count  his  money,  and  then 
he  let  it  drop,  as  if  unintentionally,  into  the  sea,  and  began  to 
bewail  his  loss;  but  others  say,  that  he  said  besides,  that  it  was 
better  for  the  money  to  be  lost  for  the  sake  of  Aristippus, 
then  Aristippus  for  the  sake  of  his  money.  Experience  proves 
that  a  well  regulated  society  is  necessary  for  the  existence  of 
any  considerable  amount  of  wealth. 

Such  would  seem  to  be  a  correct  exposition  of  the  meaning 
of  wealth,  utility,  use  value,  exchange  and  money  value  as 
understood  and  in  fact  acted  upon  by  men  generally  in  their 
dealings  with  one  another. 

But  in  the  science  of  political  economy  the  true  meaning  of 
the  above  words  or  some  of  them  has  been  a  matter  of  dis- 
pute. Ricardo  held  that  the  value  of  a  thing  depends  entirely 


22  WEALTH. 

upon  the  "quantity  of  labor"  employed  in  its  production.  He 
says,  "Value  essentially  differs  from  riches;  for  value  depends 
not  on  abundance,  but  on  the  difficulty  or  facility  of  produc- 
tion. The  labor  of  a  million  of  men  in  manufactures  will 
always  produce  the  same  value,  but  will  not  always  produce 
the  same  riches."  *  *  *  "It  may  be  said,  then,  of  two 
countries  possessing  precisely  the  same  quantity  of  the  neces- 
saries and  comforts  of  life,  that  they  are  equally  rich,  but  the 
value  of  their  respective  riches  would  depend  on  the  compara- 
tive facility  or  difficulty  with  which  they  were  produced." 

According  to  this  idea  a  gold  mine  might  be  a  bonanza  and 
contain  great  riches,  but,  if  easily  worked,  would  be  of  little 
value,  while  a  poor  one  found  and  worked  with  great  labor, 
would  contain  a  small  amount  of  riches  but  a  great  amount  of 
value. 

And  this  writer  also  says  "Many  of  the  errors  in  political 
economy  have  arisen  from  errors  on  this  subject,  from  consid- 
ering an  increase  of  riches  and  an  increase  of  value  as  mean- 
ing the  same  thing,  and  from  unfounded  notions  as  to  what 
constitutes  a  standard  measure  of  value.  One  man  considers 
money  as  a  standard  of  value  and  a  nation  grows  richer  or 
poorer,  according  to  him,  in  proportion  as  its  commodities  of 
all  kinds  can  exchange  for  more  or  less  money.  Others  repre- 
sent money  as  a  very  convenient  medium  for  the  purpose  of 
barter,  but  not  as  a  proper  measure  by  which  to  estimate  the 
value  of  other  things;  the  real  measure  of  value  according  to 
them  is  corn,  and  a  country  is  rich  or  poor  according  as  its 
commodities  will  exchange  for  more  or  less  corn."  *  *  * 
"That  commodity  alone  is  invariable  which  at  all  times  re- 
quires the  same  sacrifice  of  toil  and  labor  to  produce  it.  Of 
such  a  commodity  we  have  no  knowledge,  but  we  may  hypo- 
thetic-ally argue  and  speak  about  it  as  if  we  had;  and  may  im- 
prove our  knowledge  of  the  science,  by  showing  distinctly  the 
absolute  inapplicability  of  all  the  standards  which  have  been 
hitherto  adopted.  But  supposing  either  of  these  standards 
to  be  a  correct  standard  of  value,  still  it  would  not  be  a 
standard  of  riches;  for  riches  do  not  depend  on  value. 
A  man  is  rich  or  poor  according  to  the  abundance 
of  necessaries  and  luxuries  which  he  can  command;  and 
whether  the  exchangeable  value  of  these  for  money,  corn,  or 


WEALTH.  23 

for  labor,  be  high  or  low,  they  will  equally  contribuse  to  the 
enjoyment  of  their  possessor." 

Another  author  of  great  authority  (Malthus,  Chap.  2,  Sec. 
5)  takes  issue  with  Ricardo  upon  his  proposition  that  the 
quantity  of  labor  which  a  thing  has  cost  in  its  production  is  a 
measure  of  real  and  relative  value.  And  he  also  criticises 
another  great  authority  (Chap.  2,  Sec.  4)  as  follows:  "Adam 
Smith  in  his  chapter  on  the  real  and  nominal  price  of  com- 
modities, in  which  he  considers  labor  as  a  universal  and  accur- 
ate measure  of  value,  has  introduced  some  confusion  into  his 
enquiry  by  not  adhering  strictly  to  the  mode  of  applying  the 
labor  which  he  proposes  for  a  measure.  Sometimes  he  speaks 
of  the  value  of  a  commodity  as  being  determined  by  the 
quantity  of  labor  which  its  production  has  cost  (Ricardo's  view) 
and  sometimes  by  the  quantity  of  labor  which  it  will  com- 
mand in  exchange."  (Malthus'  view). 

According  to  these  views,  if  a  thing  cost  its  owner  no  labor 
but  would  exchange  for  something  which  cost  great  labor, — 
as  for  instance,  if  a  man  found  a  diamond  and  exchanged  it 
for  a  large  sura  of  money — then  according  to  Ricardo,  the 
diamond  would  have  no  value  because  it  cost  no  labor;  but 
according  to  Malthus  the  diamond  would  have  great  value 
because  it  would  command  in  the  exchange  the  great  amount 
of  labor  represented  by  the  sum  of  money  exchanged  for  it. 
On  the  other  hand,  Ricardo  would  consider  the  sum  of  money 
exchanged  for  the  diamond  as  having  great  value,  because  it 
cost  a  large  amount  of  labor  to  produce  it,  whereas,  Malthus 
would  say  that  the  sum  of  money  had  no  value,  because  the 
thing  for  which  it  was  exchanged,  i.  e.,  the  diamond,  cost  no 
labor. 

.  Adam  Smith  (Book  1,  Chap.  5)  says,  "Labor  is  the  real 
measure  of  the  exchangeable  value  of  all  commodities;  the 
real  price  of  everything  is  tlie  toil  and  trouble  of  acquiring  it; 
also,  labor  never  varying  in  its  own  value  is  alone  the  ultimate 
and  real  standard  by  which  the  value  of  all  commodities  can 
at  all  times  be  estimated  and  computed;  also,  equal  quantities 
of  labor  are  always  of  equal  value  to  the  laborer." 

Hence,  a  pair  of  shoes  made  by  a  shoemaker  for  himself 
which  pinch  his  feet,  or  a  coat  made  by  a  tailor  for  himself 
which  binds  under  the  arms  and  wrinkles  in  the  back,  or  a 
pair  of  pants  which  are  too  short  and  bag  in  the  seat  and  in 


24  WEALTH. 

the  knees,  depend  solely  for  their  value  to  the  laborer  or  maker, 
upon  the  quantity  of  labor  bestowed  upon  them.  The  amount 
of  utility  to  the  maker  embodied  in  the  above  shoes,  coat  and 
pants,  in  each  case,  is  measured  by  the  number  of  units  of  labor, 
i.  e.  of  toil  and  trouble,  laid  out  upon  them  respectively.  And 
the  exchangeable  value  of  a  thing  badly  made,  is  or  ought  to 
be  the  same  as  if  well  made,  provided,  equal  quantities  of  labor 
were  expended  in  the  two  cases.  And  also,  of  two  farmers, 
if  one  by  absence  of  cheat,  blight,  rust,  flies,  insects,  or  by 
good  luck,  superior  skill,  or  better  quantity  of  land,  raised 
forty  bushels  of  wheat  per  acre,  and  the  other  with  the  same 
amount  of  toil  and  trouble  raised  only  twenty  bushels  per  acre, 
then  by  this  ultimate  and  real  standard,  the  twenty  bushels, 
although  of  an  inferior  quality,  would  be  of  equal  value  with 
the  forty.  Or,  in  mining,  if  one  man  produced  twice  or  any 
number  of  times  as  much  gold,  silver,  copper,  iron,  or  coal  as 
another  by  the  same  amount  of  labor,  then  the  smaller  quan- 
tity is  of  equal  value  with  the  larger.  A  lump  of  gold,  or 
other  valuable,  casually  found  and  picked  up  would  be  rated  at 
one  price,  and  the  same  quantity  obtained  after  great  toil  and 
trouble  at  another.  Hogs  fattened  upon  grain  would  be  worth 
more,  although  the  pork  was  no  better,  than  if  they  had  run 
in  the  woods  and  fattened  themselves  upon  acorns,  beech  nuts, 
etc.  Furs  would  be  worth  more,  if  the  animals  were  raised 
by  hand,  then  if  shot  wild  in  the  woods.  Water  ought  to  be 
worth  less  to  a  thirsty  man  if  it  burst  spontaneously  from  the 
earth,  then  if  distilled  drop  by  drop  out  of  some  solution.  A 
great  invention  or  discovery  would  be  worth  nothing,  if  it  were 
the  result  of  a  lucky  accident,  or  of  a  sudden  and  happy  stroke 
of  genius,  but  would  be  of  great  value,  if  it  were  the  result  of 
the  labor  of  a  lifetime.  The  more  labor  expended  upon  a 
thing  the  greater  its  value. 

According  to  this  theory,  in  order  to  measure  the  real  and 
relative  value  of  all  commodities,  a  unit  of -toil  and  trouble  is 
required.  What  are  equal  quantities  of  labor  ?  How  much 
of  the  unit  would  be  toil  and  how  much  of  it  trouble  ?  How 
do  they  compare  with  each  other  ?  The  more  it  troubled  a 
man  to  work,  the  more  trouble  would  be  undergone  in  a  unit 
of  time.  This  might  arise  from  the  sun  shining  hotter  at  one 
time  than  at  another,  or  from  sickness  or  ill  health,  physical 


WEALTH.  25 

or    mental    weakness,    laziness   or  hardship   peculiar  to   the 
occupation. 

It  has  been  thought  that  labor,  or  toil  and  trouble,  may  be 
regarded  as  having  two  dimensions  or  modes  of  varying  in  re- 
gard to  quantity:  its  duration  and  its  intensity.  Therefore,  if 
a  laborer  began  work  at  sunrise,  the  amount  of  toil  and  trouble 
undergone  for  the  first  hour  of  labor  would  be  a  certain  quant- 
ity which  might  be  represented  by  the  area  of  a  rectangle  of 
which  one  side  would  represent  duration,  i.  e.  the  unit  of  time, 
one  hour;  the  other  side  would  represent  the  intensity  of  the 
toil  and  trouble  for  the  first  hour  as  above.  As  the  sun  rose 
higher  and  higher  and  shone  hotter  and  hotter  the  intensity 
of  the  toil  and  trouble  undergone  for  each  succeeding  hour 
would  increase.  This  would  increase  the  area  of  the  rectangle 
for  each  succeeding  hour  by  the  continual  lengthening  of  the 
line  representing  intensity.  This  line  would  also  increase  in 
length  if  the  dust  began  to  fly,  and  also  it  would  increase  as 
the  day  wore  on,  from  weariness  from  the  continuance  of  the 
toil.  Hence  it  is  evident,  geometrically,  that  the  amount  of 
toil  and  trouble  would  increase  continually.  And  hence  the 
value  of  the  labor  would  be  much  less  for  the  first  hour  when 
the  sun  was  low,  the  weather  cool  and  the  laborer  fresh  and 
unwearied,  than  it  would  be  at  mid-day  or  during  the  heat  of 
the  afternoon.  The  more  toil  and  trouble,  the  more  value 
produced 

In  constructing  the  rectangles,  a  unit  of  length,  say  one  foot, 
could  be  taken  to  represent  the  unit  of  time,  one  hour,  and 
such  line  might  be  made  the  base  of  the  rectangle,  then  its 
altitude  would  be  the  line  representing  intensity.  How  long 
shall  this  line  be  ?  It  has  no  definite  relation  to  the  one  rep- 
resenting duration:  Therefore,  suppose  it  is  also  assumed  to 
be  of  a  certain  length  for  the  first  hour  of  labor,  as  say  one 
foot.  Then  a  square  foot  of  area  represents  the  amount  of 
toil  and  trouble  undergone  by  some  specified  laborer  for  the 
first  hour  of  labor,  and  therefore  also  represents  the  "ultimate 
and  real  standard"  of  value.  Now  for  the  second  hour  if  the 
laborer  exerted  the  same  amount  of  energy  as  for  the  first 
hour,  it  would  hurt  him  more,  the  same  amount  of  toil  would 
cause  more  trouble,  as  above  indicated.  Therefore  the  altitude 
of  the  rectangle  for  the  second  hour  of  labor  would  be  greater 
than  for  the  first  hour,  owing  to  the  increase  in  intensity. 


26  WEALTH. 

But  how  much  ?  No  one  could  say.  Xor  could  physical  and 
mental  labor  be  compared,  and  the  rectangle  of  each  con- 
structed. And  yet  if  labor,  or  toil  and  trouble,  is  the  ultimate 
and  real  standard  of  real  and  relative  value,  economics  fails  as 
a  science,  unless  a  unit  of  toil  and  trouble  can  be  Constructed 
so  as  to  measure  the  quantity  of  toil  and  trouble  undergone 
by  a  man  physically  strong  and  mentally  weak,'  or  the  con- 
trary, or  strong  in  both  respects,  or  weak  in  both;  and  also  as 
between  men,  women  and  children;  and  in  different  occupations 
involving  different  degrees  of  hardship. 

In  socialism,  the  unit  of  wealth  and  value,  is  labor  for  the 
period  of  one  day  of  social  labor  time.  The  total  annual 
production  divided  by  the  total  number  of  social  labor  days 
required  to  produce  it,  gives  the  product  due  for  the  labor  of 
one  day.  A  certificate  issued  for  one  day's  work  draws  the 
proper  amount  of  product  due  therefor  from  the  public  ware- 
houses. These  certificates  are  the  money  of  socialism  (Shaffle, 
Quintesence  of  Socialism).  The  unit  of  labor  or  toil  and 
trouble,  is  measured  only  by  duration,  and  not  at  all  by  inten- 
sity. It  is  arbitrarily  assumed,  that  work  for  one  day  of  social 
labor  time  always  covers  an  equal  amount  of  toil  and  trouble, 
and  therefore  is  always  of  equal  value.  Consequently  all  are 
paid  alike,  men,  women  and  children.  This  unit  of  toil  and 
trouble  is  an  average.  No  allowance  is  made  for  superior 
ability,  physical  or  mental,  nor  for  superior  knowledge,  skill, 
diligence,  dexterity,  etc.  Idleness,  ignorance  and  stupidity 
are  at  a  premium.  Only  the  average  worker  gets  his  deserts. 
The  man  or  boy  who  blows  the  bellows  and  pounds  on  the  iron 
with  the  sledgehammer,  draws  the  same  pay  as  the  skilful 
blacksmith  who  turns  the  metal  into  shape.  One  pair  of  shoes 
badly  made  by  an  idle,  careless  and  unskilled  workman  has 
the  same  value  in  socialism  as  two  pair  well  made  in  the  same 
time  by  a  diligent,  careful  and  skilled  workman.  Stale  vit- 
uals,  decayed  fruit,  spoiled  meat,  mouldy  shoes  and  moth  eaten 
clothing  have  greater  value  in  socialism  than  fresh  stock 
produced  and  warehoused  with  less  labor  measured  as  above. 

But  if  wealth  consists  of  utilities,  its  amount  is  measured 
by  the  amount  of  utility:  and  therefore,  it  is  immaterial  to  the 
existence  of  wealth  and  its  amount,  what  may  be  the  source  of 
the  utility,  and  if  derived  from  any  source  or  process  in  which 
labor  took  a  part,  the  amount  of  utility  determines  the  value 


WEALTH.  27 

of  the  labor  and  not  the  contrary.  Labor  no  matter  how 
great,  which  produces  no  utility,  is  of  no  value.  And  the 
common  practice  is  to  measure  the  value  of  labor  by  measur- 
ing the  value  of  its  product.  If  the  quantity  of  toil  and  trouble 
expended  upon  the  pyramids  could  be  measured,  it  would 
furnish  no  measure  of  their  value.  But  "quantities  of  toil 
and  trouble,"  if  of  any  practical  value,  have  not  yet  been 
measured  or  found  measurable.  Therefore,  socialism  pro- 
ceeding upon  the  theory  that  labor  is  the  sole  source  of  value, 
adopts  an  arbitrary  unit.  Whereas  it  hurts  a  lazy  man  much 
more  to  work  than  one  who  is  naturally  industrious,  and  also 
it  hurts  a  child  more  to  work  than  a  grown  person;  yet  social- 
ism would  pay  a  lazy  man  or  a  child,  no  more  than  one  who 
would  rather  work  than  not.  And  labor  unions  are  imbued 
with  a  similar  idea;  the  unpopular  man  is  the  one  who  can 
"best"  the  average  worker. 

If  equal  amounts  of  utility  are  produced  by  the  same 
operative,  or  by  different  ones,  during  equal  periods  of  time, 
then,  and  in  such  cases  only,  equal  quantities  of  labor  as 
measured  by  equal  periods  of  time  may  be  said  to  be  of  equal 
value.  If  any  labor  exerted,  produced  value,  then  it  might 
be  created  by  carrying  a  pile  of  stones  back  and  forth,  and 
enterprises  which  end  in  failure  ought  to  end  always  in 
success.  Any  labor  whicli  is  so  ill  directed  that  it  produces 
only  a  small  amount  of  utility,  is  only  of  small  value.  The 
laborer  who  makes  an  excavation  by  carrying  out  the  dirt  in  a 
basket  upon  his  head,  cannot  expect  the  same  pay  as  one  who 
is  expert  with  the  wheelbarrow.  And  the  farmer  who  is  a 
bad  manager  will  not  reap  the  same  profit  as  another  who 
never  makes  a  stroke  amiss. 

Also,  it  is  the  consumer  who  measures  the  utility  after  it  is 
produced.  The  producer  cannot  compel  him  to  pay  more  for 
homespun,  because  it  cost  more  labor,  than  for  fine  goods, 
which  cost  less.  If  the  supply  of  an  article  is  in  excess  of  the 
demand,  its  value  declines,  because  there  is  a  dearth  of  want. 
And  the  laborer  who  would  insist,  upon  producing  a  com- 
modity which  is  no  longer  wanted,  needs  either  a  factory  for 
the  production  of  wants,  or  a  law  to  compel  others  to  use  the 
article,  whether  or  no.  Perishable  articles  as  fruits,  flesh, 
fish,  etc.,  if  in  excessive  supply,  are  forced  upon  buyers  only 


28  WEALTH. 

at  their  own  price.       And  old  stock  and  goods  out  of  style,  or 
not  wanted,  share  the  same  fate. 

The  doctrine  that  equal  quantities  of  labor  are  always  of 
equal  value  to  the  laborer  might  apply,  if  he  were  his  own 
customer.  Then  he  could  measure  the  amount  of  his  toil  and 
trouble  and  the  value  of  the  product  to  suit  himself.  On  one 
side  he  might  figure  up  the  pain  and  sacrifice  caused  by  the 
toil  and  trouble,  and  on  the  other  side  the  zest  and  relish 
which  labor  gives  to  appetite.  But  he  cannot  sell  his  product 
upon  the  basis  of  his  own  keen  appetite,  nor  upon  that  of  the 
toil  and  trouble  which  conferred  it. 

II. 

DIFFERENT  KINDS  OF  WEALTH. 

Since  nothing  is  wealth  unless  it  is  also  property,  therefore, 
wealth  consists  of  all  kinds  of  property  which  have  a  money 
value. 

Property  consists  of  things  and  rights  to  things;  and  the 
things  may  be  corporeal  or  incorporeal.  The  word  property  is 
applied  not  only  to  the  thing,  but  also  to  the  right  to  it.  As  for 
instance,  a  horse  may  be  property,  and  so  also  the  right  to  it, 
whether  absolute  or  qualified.  The  right  to  use  the  horse  for 
a  limited  time  is  property,  as  well  as  the  entire  ownership. 

The  word  wealth  has  been  loosely  used  after  the  same  man- 
ner. As  commonly  used  it  refers  to  the  things  which  have  or 
possess  utility,  but  it  has  also  been  defined  as  consisting  of 
utilities. 

By  referring  to  the  law  of  property,  it  is  to  be  noticed  in 
the  first  place,  that  there  are  certain  personal  rights  which  are 
of  great  value  and  are  either  essential  or  very  material  to  the 
enjoyment  of  wealth,  but  which  are  not  ordinarily  classed 
under  that  head.  These  are: 

1.  The  right  of  personal  security,  which   consists  in  a  per- 
son's legal  right  to   his  life,  limbs,  body,  health,  reputation 
and  opinions. 

2.  The  right  of  personal  liberty,  as  defined  by  law. 

3.  Sundry  other  personal  rights,  such  as  to  have  the  benefit 
and  protection  of  the  laws,  bear  arms,  vote,  etc. 

Some  of  these  are  of  inestimable  value  to  the  possessor,  as 
the  right  to  life.  And  the  law  awards  as  an  equivalent  for  a 
loss  or  injury  to  any  of  them,  damages  in  money  against  the 


WEALTH.  29 

wrongdoer.  The  usual  remedy  at  law  is  damages  estimated 
in  money.  All  property  is  valued  in  the  law  for  all  purposes 
in  terms  of  the  money  unit;  legal  value  is  money  value. 

And  any  person  has  the  right  to  labor  at  any  lawful  calling, 
if  he  sees  fit  to  do  so.  Time  and  labor  expended  therein  is 
wealth,  if  it  has  a  money  value.  And  an  action  lies  for  work 
and  labor  done  for  another  at  his  request,  to  recover  its  money 
value.  In  this  country,  provided  a  man  supports  himself  and 
his  family,  he  may  work  or  not,  as  he  chooses.  If  he  prefers 
poverty  in  ease  and  idleness  to  any  degree  of  opulence  which 
might  be  won  by  industry  and  frugality,  he  is  in  no  way 
bound  to  spend  his  life  in  the  pursuit  of  wealth,  or  to  mount 
any  treadmill,  socialistic  or  otherwise,  organized  for  its  pro 
duction. 

At  the  same  time  it  is  provided  in  the  statutes  that  vaga- 
bonds, idle  and  dissolute  persons  who  go  about  begging,  per- 
sons who  use  any  juggling  or  unlawful  games  or  plays,  run- 
aways, pilferers,  common  drunkards,  common  night-walkers, 
lewd  wanton  and  lascivious  persons  in  speech  or  behavior, 
common  railers  and  brawlers,  persons  who  habitually  neglect 
their  employment  or  calling  and  do  not  provide  for  themselves 
or  for  the  support  of  their  families,  and  all  other  idle  and  dis- 
orderly persons,  including  those  persons  who  neglect  all  lawful 
business  and  habitually  misspend  their  time  by  frequenting 
houses  of  ill  fame,  gaming  houses  or  tippling  shops,  may  be 
confined  in  the  county  jail,  or  in  the  workhouse  if  there  be 
one,  or  house  of  correction  if  there  be  one,  or  fined,  etc. 
Society  is  not  at  present  organized  in  favor  of  any  such 
persons. 

In  addition  to  the  above,  there  is  also: 

4.  The  right  of  property,  which  consists  in  the  free  use, 
enjoyment  and  disposal  of  a  man's  lawful  acquisitions  without 
any  control  or  diminution  save  only  by  the  laws  of  the  land. 

These  lawful  acquisitions  are: 

a.  Land. 

b.  Personal    chattels  in    possession,  as    goods,    movables, 
moneys,  etc. 

c.  Things    incorporeal,    as    offices,    franchises,   annuities, 
patents  and  copyrights,  credits,  just  claims,  etc. 

Not  only  lands  and  goods,  but  also  gainful  offices,  valuable 
franchises,  such  as  the  right  to  construct  and  operate  a  rail- 


30  WEALTH. 

road  or  telegraph  line,  valuable  patents  and  copyrights,  stocks^ 
bonds,  negotiable  paper,  bank  accounts,  just  claims  for  money 
due  and  the  like  are  all  wealth  in  common  estimation.  Offices 
of  trust  not  gainful,  worthless  franchises  patents  and  copy- 
rights, bad  debts  and  other  items  of  property  of  no  money 
value  are  not  accounted  as  wealth.  Some  things  so  consid- 
ered may  not  be  assignable  at  law,  as  balances  due  on  open 
account,  just  claims  unsettled,  offices,  etc.,  but  their  money 
value  can  be  estimated  by  other  modes  than  transfer. 

The  rights  of  personal  liberty,  personal  security  and  private 
property  are  defined  in  the  law  with  great  detail  and  pre- 
cision. Every  person  is  required  to  so  conduct  himself  and 
use  his  own  as  not  to  injure  another.  Everyone  is  entitled  to 
pursue  any  lawful  calling  upon  his  own  terms,  and  all  combi- 
nations to  dictate  by  force  or  threats  either  wages  and  who 
shall  earn  them,  or  the  prices  of  products  and  who  shall  pro- 
duce them,  are  alike  unlawful. 

But  the  law  sanctions  and  protects  the  monopoly  which 
every  man  has  in  his  lawful  acquisitions.  And  wealth 
invested  in  land  is  equally  entitled  to  protection  with  wealth 
invested  in  any  other  kind  of  property.  And  the  man  of 
property  is  equally  entitled  to  protection  as  if  he  were  poor. 
Poverty,  if  honestly  come  by,  is  no  disgrace,  but  it  merits  no 
reward.  Indeed,  both  human  and  divine  law  favor  the  dili- 
gent and  frugal  man,  whether  he  be  rich  or  poor. 

It  is  said  (2  Kent's  Com.  331)  "Every  person  is  entitled  to 
be  protected  in  the  enjoyment  of  his  property,  not  only  from 
invasions  by  individuals,  but  from  all  unequal  and  undue 
assessments  on  the  part  of  the  government.*  It  is  not  suffi- 
cient that  no  tax  or  imposition  can  be  imposed  upon  citizens 
but  by  their  representatives  in  the  legislature.  The  citizens 
are  entitled  to  require  that  the  legislature  itself  shall  cause  all 
taxation  to  be  fair  and  equal  in  proportion  to  the  value  of 
property,  so  that  no  one  class  of  individuals  and  no  one  species 
of  property  may  be  unequally  or  unduly  assessed^  And  in 
Lowell  v.  Boston,  111  Mass.  454,  after  the  great  fire  in  Boston, 
the  power  of  the  state  to  tax  in  order  to  lend  out  the  moneys 
to  persons  who  had  suffered  by  the  fire  was  denied. 

The  exercise  of  the  right  of  eminent  domain  is  in  the 
nature  of  a  compulsory  purchase,  and  the  property  taken,  must 
be  paid  for.  Usually  in  such  cases,  when  the  public  use 


WEALTH.  31 

ceases,  the  property  reverts  to  the  private  owner.  But  the 
absolute  title  may  be  taken  if  the  statute  so  provides. 

For  the  taxes  which  one  pays,  and  the  other  public  burdens 
which  he  assumes  in  common  with  the  rest  of  the  community, 
he  receives  from  the  government  the  protection  and  benefit  of 
its  laws.  Cooley's  Const.  Lim.  559. 

To  attempt  to  confiscate  any  private  property  under  the 
form  of  a  tax  would  be  evidently  illegal  and  void. 

III. 

FALSE  DEFINITIONS. 

As  the  money  test  of  wealth  is  evidently  the  true  one,  it 
might  be  reasonably  supposed  that  the  science  of  wealth  would 
accept  of  it  as  a  basin,  and  thereupon  treat  of  the  different 
kinds  and  their  quantity,  and  of  the  nature,  causes  and  amount 
of  their  value.  But  this  science  is  usually  called  political 
economy,  and  properly  so,  for  its  aims  are  more  political  than 
economic.  One  inference  derived  from  it  has  been  that  dyna- 
mite is  needed  here  as  well  as  abroad;  and  its  advanced 
teachers  propose  "to  dress  the  commonwealth  and  turn  it,  and 
put  a  new  nap  on  it." 

This  science  ignores  the  proper  meaning  of  the  word  wealth 
as  above  given,  and  adopts  one  of  its  own.  Thus  (Mill,  Book 
1,  Chap.  3)  "Productive  labor  means  labor  productive  of 
wealth.  We  are  recalled,  therefore,  to  the  question  touched 
upon  in  our  first  chapter,  what  wealth  is  and  whether  only 
material  products  or  all  useful  products  are  to  be  included  in 
it»  *  *  *  «j  shall.  therefore,  in  this  treatise,  when 
speaking  of  wealth,  understand  by  it  only  what  is  called  ma- 
terial wealth,  and  by  productive  labor  only  those  kinds  of 
exertion  which  produce  utilities  embodied  in  material  objects."- 
According  to  this  author,  wealth  alone  consists  of  "utilities 
embodied  in  material  objects  as  the  product  of  labor."  And 
this  definition  is  taken  as  the  basis  for  a  treatise,  assumed  to 
be  scientific  and  exhaustive,  upon  the  "Principles  of  Political 
Economy  with  Some  of  Their  Applications  to  Social  Philoso- 
phy." Another  treatise,  less  covert  in  setting  forth  its  object 
and  purpose,  and  styled  "Progress  and  Poverty,"  expresses 
the  above  definition's  follows:  "Wealth  is  labor  impressed 
upon  matter  in  such  a  way  as  to  store  up,  as  the  heat  of  the 
sun  is  stored  up  in  coal,  the  power  of  human  labor  to  minister 


32  HEALTH. 

to  human  desires."  The  same  definition,  in  substance,  is 
adopted  in  various  standard  works  upon  this  science,  by  treat- 
ing the  subject  under  the  heads  of  the  production,  distribution 
and  consumption  of  wealth;  or  of  production  and  distribution. 
This  method  of  treatment  implies  that  wealth  consists  only  of 
such  things  which  are  produced,  distributed  and  consumed,  or 
at  least  produced  and  distributed.  This  is  the  definition 
actually  adopted  in  such  treatises,  although  another  or  others 
may  be  mentioned,  only  to  be  afterwards  disregarded  and  cast 
aside. 

According  to  the  above  definitions,  all  corporeal  property 
having  any  utility  or  value  which  is  not  the  product  of  labor 
is  not  wealth  in  respect  of  any  such  utility  or  utilities;  also, 
all  incorporeal  property  having  utility  or  value,  whether  it  be 
the  product  of  labor  or  not,  is  not  wealth.  The  result  is  that 
the  following  items  of  property  are  not  wealth,  according  to 
the  above  false  definitions,  although  commonly  supposed  to 
be  so: 

1.  Land  in  its  natural  state  (i.  e.  unimproved,  or,  if  im- 
proved, then  exclusive  of  the  improvements  thereon),  even  if 
located  adjoining  to  or  in  the  heart  of  a  great  city. 

2.  All    natural   products,  as    diamonds    and   other   gems, 
lumps  of  gold,  silver,  copper  or  other  metal,  mines  or  deposits 
of  any  of  them  or  of  their  ores,  or  of   coal,  petroleum,  natural 
gas,  slate,  marble,  etc.;  also  grass,  timber,  wild  fruits,  etc. 

3.  All  useful  products  not  material;  all  incorporeal  things 
and  rights  to  things;  all  bonds,  stocks,  bank  accounts,  credits, 
offices,   franchises,    annuities,   patents   and  copyrights.     Any 
paper  or  other  material  evidence  of   any  of  these  rights  is  not 
to  be  confounded  with  the  rights  themselves.     The  right  to 
receive  fifty  thousand  dollars  a  year  as  president  of  the  United 
States  is  not  wealth,  as  above  defined. 

Xone  of  the  above  items  are  the  material  products  of  labor; 
they  are  not  produced,  distributed  and  consumed.  An 
inventor  or  author  may  create  a  useful  product,  but  it  is  not  a 
material  product,  and  therefore  is  not  wealth;  it  is  a  figment 
of  the  brain  and  immaterial.  The  laborer  who  makes,  as 
directed,  the  newly  invented  machine,  <jr  who  embodies,  as 
directed,  a  utility  in  a  material  object  by  employing  the  new 
process,  is  the  productive  laborer;  his  product  is  wealth,  the 


WEALTH.  33 

patent  right  is  not;  and  so  also,  the  printed  book  is  wealth, 
the  copyright  is  not. 

Now  there  are  not  two  kinds  of  wealth;  one  as  above  defined 
and  which  might  be  styled  political  economy  wealth,  and 
another  which  would  include  everything  considered  to  be 
wealth  in  general  and  legal  estimation.  The  things  above 
specified  as  being  excluded  by  the  definition  from  being  polit- 
ical economy  wealth,  are  exchangeable  with  the  material 
products  of  labor  and  are  assessed  and  taxed  along  with  them; 
therefore  the  distinction  attempted  to  be  made  between  polit- 
ical economy  wealth  and  other  kinds  is  not  perceptible  to  the 
common  mind.  Only  those  who  propose  to  make  the  laborer 
the  sole  source  of  wealth,  and  especially  the  wage  laborer,  and 
to  denounce  all  kinds  of  property  excepting  the  material 
products  of  labor  as  spurious  or  false  wealth,  would  adopt  a' 
definition  so  manifestly  untrue. 

It  has  been  already  stated  that  it  would  seem  to  be  imma- 
terial to  a  correct  definition  of  wealth  whether  it  was  applied 
to  the  things  having  or  possessing  the  utilities,  or  was  applied 
to  the  utilities  themselves.  As  commonly  used  the  word 
wealth  is  understood  to  refer  to  the  things,  and  their  utilities 
are  referred  to  under  the  head  of  value.  Used  in  this  way 
the  word  would  include  all  utilities  possessed  by  material 
objects,  whether  embodied  by  labor  or  not,  and  also  all 
utilities  possessed  by  things  incorporeal,  as  already  stated. 
As  to  political  economy  wealth,  or  those  utilities  only  which 
are  said  to  be  embodied  in  material  objects  by  labor,  it 
becomes  necessary  to  define  labor. 

The  ordinary  meaning  of  labor  is  (Webster)  "Physical  toil 
or  bodily  exertion,  especially  when  fatiguing,  irksome,  or 
unavoidable,  in  distinction  from  sportive  exercise;  also  intel- 
lectual exertion,  mental  effort."  And  in  political  economy 
(Mill,  Book  1,  Chap.  1),  "Labor  is  bodily  or  mental;  or,  to  ex- 
press the  distinction  more  comprehensively,  either  muscular 
or  nervous;  and  it  is  necessary  to  include  in  the  idea  not 
solely  the  exertion  itself,  but  all  feelings  of  a  disagreeable 
kind,  all  bodily  inconvenience  or  mental  annoyance  connected 
with  the  employment  of  one's  thoughts  or  muscles,  or  both,  in 
a  particular  occupation."  This  seems  similar  to  what  is  called 
by  Adam  Smith,  toil  and  trouble.  Another  author  (Cairnes, 
Chap.  4)  says:  "Considering  labor  as  an  element  of  the  cost 


34  WEALTH. 

of  production,  the  principal  remark  that  seems  called  for,  is 
that  in  estimating  it  in  this  character,  three  circumstances  and 
three  only,  must  be  taken  account  of,  namely,  the  duration  of 
the  exertion,  the  degree  of  its  severity  or  irksomeness,  and  the 
risk  or  liability  to  injury  of  any  kind  attending  it.  As  com- 
modities differ  greatly  more  in  the  duration  of  the  exertion,  or 
the  quantity  of  the  labor  required  for  their  production,  than 
in  the  severity  of  the  labor  or  the  risk  attending  it,  the  former 
is  obviously  the  most  important  circumstance  in  the  case,  and 
it  was  to  it  alone  that  Ricardo,  in  his  analysis  of  cost,  had 
regard;  but  manifestly  his  exposition  was  in  this  respect 
defective.  The  labor  employed  in  producing  different  com- 
modities differs  in  severity  and  in  liability  to  accident,  as  well 
as  in  mere  quantity,  and,  in  proportion  as  it  is  more  severe  or 
more  liable  to  accident,  implies  other  things  being  the  same, 
a  greater  sacrifice,  and  therefore  a  larger  cost.  This  greater 
sacrifice  will  require  greater  compensation,  which,  as  in  other 
cases,  can  only  be  furnished  from  the  value  of  the  product- 
Commodities,  accordingly,  will  exchange — if  we  confine  our 
attention  to  the  labor  element  of  cost — not  simply  in  propor- 
tion to  the  quantity  of  labor  employed  in  their  production, 
but  in  proportion  to  this  multiplied  by  the  severity  of  the 
labor  or  the  risk  attending  it.  When,  however,  we  have 
taken  account  of  the  quantity,  irksomeness  and  risk,  we  have 
taken  account  of  every  incident  in  virtue  of  which  labor  is  an 
element  of  cost  of  production,  and  affects  through  this  prin- 
ciple the  value  of  commodities." 

It  thus  appears  that  labor  in  political  economy  is  taken  in 
its  ordinary  sense,  as  being  simply  human  exertion,  physical 
or  mental,  or  both,  and  it  includes  nothing  else.  The  author 
last  quoted,  in  measuring  its  value  would  take  into  considera- 
tion its  duration  and  intensity,  and  the  risk  attending  it. 

And  it  is  also  to  be  observed  that  labor  exerted,  no  matter 
how  great  its  quantity  or  duration,  its  intensity  and  the  risk 
attending  it,  goes  for  nothing  unless  a  utility  is  embodied  by 
it.  For  wealth  as  above  defined  consists  of  utilities  embodied. 
Therefore  no  matter  how  great  the  sacrifice,  if  there  is  no 
resulting  utility,  the  labor  has  earned  no  reward.  Mere  labor 
is  not  wealth,  but  the  utility  embodied  by  it,  if  there  is  any. 
In  the  early  days  of  gold  mining  in  California,  a  party  of  men 


WEALTH.  35 

carried  a  large  ditch  for  many  miles  and  found  at  last  that 
the  intended  outlet  was  higher  than  the  source. 

Labor  signifies  merely  the  human  machine  exerting  its- 
energy  in  work.  If  well  fed  and  cared  for,  it  would  exert  its 
maximum  power  in  a  certain  period  of  time.  Therefore  the 
same  man,  if  savage  or  entirely  ignorant,  can  exert  as  much 
labor  in  a  specified  time  as  if  he  were  the  most  knowing  and 
skilful  of  men.  Different  men  and  different  races  of  men, 
equally  ignorant,  would  differ  in  the  amount  of  work  done  by 
them,  in  consequence  of  the  difference  existing  between  them 
in  physical  and  mental  powers. 

Now  labor  by  itself  cannot  create  wealth,  for  it  does  not 
know  what  utilities  to  embody,  nor  how  to  do  it.  These 
require  knowledge  and  skill  either  in  the  laborer,  or  in  his 
employer  or  director.  To  know  what  utilities  to  embody  and 
how  to  do  it  requires  knowledge.  Skill  or  familiar  knowledge 
united  to  readiness  of  performance  enables  labor  to  embody 
the  utility  as  directed  by  knowledge.  Labor  is  one  thing  and 
knowledge  and  skill  another,  and  the  two  are  to  be  kept  sepa- 
rate and  separately  considered,  for  the  labor  may  be  furnished 
by  one  person,  and  the  knowledge  and  skill  by  another,  or 
others. 

Labor  knows  nothing;  it  is  simply  force  exerted  by  the 
human  mechanism.  "He  (man)  has  no  other  means  of  act- 
ing on  matter  than  by  moving  it.  Motion  and  resistance  to 
motion  are  the  only  things  his  muscles  are  constructed  for. 
By  muscular  contraction  he  can  exert  a  pressure  on  an  out- 
ward object,  which,  if  sufficiently,  powerful,  will  set  it  in  mo- 
tion, or  if  it  be  already  moving,  will  check  or  modify  or  alto- 
gether arrest  its  motion,  and  he  can  do  no  more."  *  * 
"Labor,  then,  in  the  physical  world,  is  always  and  solely  em- 
ployed in  putting  objects  in  motion;  the  properties  of  matter, 
the  laws  of  nature  do  the  rest,"  (Mill  Book  1,  Chap.  1).  Labor 
has  the  same  relation  to  utilities  as  other  forms  of  energy. 
The  man  or  the  machine  that  can  create,  modify  or  arrest 
motion  and  do  no  more,  stand  upon  an  equal  footing.  Both 
require  an  employer  and  director  to  set  them  in  motion  in  the 
right  direction  and  for  the  right  purpose  and  arrest  their  mo- 
tion at  the  right  time.  Labor,  which  of  itself  does  not  know 
what  to  do  or  how  to  do  it,  is  not  the  source  of  all  wealth. 


36  WEALTH. 

Knowledge  directs  labor  to  put  the  seed  into  the  ground 
and  how  to  produce  and  gather  the  crop;  how  to  make  the  axe 
and  use  it;  how  to  separate  the  tree  into  planks  and  convert 
them  hro  a  table  or  house;  how  to  apply  fire  to  fuel,  cook 
food,  soften  or  melt  iron,  convert  into  beer  or  sugar  the  malt 
or  cane  juice,  to  generate  steam,  and  generally  to  take  com- 
mand of  the  powers  of  nature  and  make  them  the  servants  of 
man. 

The  steam  vessel,  the  workshop  or  manufactory  with  all 
ols  and  appliances,  the  railroad,  bridge,  house,  and  even 
the  simplest  tool,  must  all  exist  in  idea  before  they  do  in  fact. 
In  order  that  a  house  may  not  be  a  heap  of  rubbish,  it  must 
have  a  designer.  He  furnishes  the  plans  and  specifications 
to  the  smallest  detail.  These  skilled  labor,  under  the  direc- 
tion of  an  employer  and  waited  upon  and  assisted  by  common 
labor,  follow,  and  the  house  becomes  a  fact.  But  although 
perfect  in  every  part,  it  must  be  suited  to  its  locality  and  to 
the  purpose  intended.  A  business  house  built  in  some  se- 
cluded spot  or  even  on  the  wrong  street  in  a  city,  might  be 
worth  less  than  the  original  value  of  its  materials.  The 
bridge,  if  well  made  and  strong  enough  to  sustain  itself  and 
its  load,  must  not  be  too  short  for  the  span.  If  a  tunnel  is  to 
pierce  a  mountain,  it  must  be  of  the  proper  size  and  run  in  the 
right  direction.  If  work  were  carried  on  at  both  ends  and 
the  two  parts  failed  to  meet  each  other,  where  would  be  the 
utility?  Labor  alone  could  not  have  built  the  Brooklyn 
Bridge  if  it  had  had  an  unlimited  command  of  land  and 
capital.  Among  the  requisites  of  production  are  knowledge 
and  skill.  They  lift  the  savage  into  the  civilized  man.  They 
know  how  to  run  the  machinery  of  production  and  how  to 
make  the  machinery  and  the  machine  that  makes  it.  They 
can  endow  the  machine  with  almost  supernatural  intelli- 
gence and  power.  The  telephone  reproduces  the  voice  of 
the  absent;  the  phonograph  calls  up  the  voices  of  the  dead. 
The  locomotive  finds  its  way  in  darkness  as  well  as  day- 
light and  steers  itself.  The  power  loom  weaves  carpets. 
cloth,  shawls  and  lace  in  beautiful  and  complicated  designs. 
Knowledge  includes  the  knowledge  of  wants  as  well  as  of 
the  means  to  gratify  them.  It  varies  the  product  and  avoids 
the  production  of  unsaleable  goods.  It  preconceives  the 
jns  and  aided  by  skill  adorns  the  goods  with  beautiful 


WEALTH.  37 

colors   and    figures,  and    gives    to    them    a    style    and  finish 
which  commands  the  customer. 

It  is  said  (Progress  and  Poverty),  wealth  is  labor  impressed 
upon  matter  in  such  a  way  as  to  store  up  the  power  of  human 
labor  to  minister  to  human  desires.  Hence  the  labor  must  be 
so  stored  up  as  to  answer  to  the  desires.  This  requires  an 
educated  and  directing  mind,  either  in  the  laborer  himself,  or 
in  some  other  person  who  is  his  employer.  In  the  latter  case, 
the  employer  is  the  author  of  the  utility  and  the  laborer  is 
merely,  one  of  his  tools.  Ignorant  labor  cannot  decide 
whether  electric  wires  should  be  strung  overhead  or  put  under 
ground,  nor  how  much  current  they  can  safely  carry,  nor 
whether  it  ought  to  be  alternating  or  continuous.* 

In  a  common  text-book  of  political  economy  (Wayland- 
Chapin)  it  is  said,  "The  original  source  of  wealth  is  the  bounty 
of  God  in  nature,  and  the  secondary  source  is  human  labor 
exerted  to  bring  forth  the  bounty  of  nature  in  form,  in  time 
in  place  suited  to  the  desires  of  men.  This  gives  the  right  of 
possession,  which  controls  the  gift  of  nature  and  the  added 
utility  imparted  by  labor."  Without  knowledge  and  skill, 
human  labor  can  do  nothing  of  the  kind.  It  is  only  under 
their  direction  that  the  bounty  is  brought  forth  in  form,  time 
and  place  so  as  to  be  suited  to  the  desires  of  men.  Before 
the  entire  title  to  wealth  is  vested  in  labor  it  needs  a  precise 
definition.  And  when  correctly  defined,  human  labor  stands 
in  the  same  category  with  that  of  other  machines,  unless  it  is 
combined  with  enough  knowledge  and  skill  to  run  the  sense- 
less machine. 

The  most  important  product  is  educated  and  skilled  labor. 
It  can  be  its  own  employer.  It  is  sought  after  and  paid  high 
wages,  and  it  often  dictates  its  own  price.  Not  so  with 
ignorant  labor;  it  must  advertise  for  work  and  do  what  it  is 
directed  to  do.  Among  laborers,  so  called,  there  is  no 
equality;  first,  are  the  inventors  and  discoverers  who  enlarge 
the  bounds  of  knowledge,  alleviate  toil  and  heighten  or  mul- 
tiply enjoyment;  next  are  all  kinds  of  educated  and  skilled 
labor;  and  as  labor  becomes  more  physical  and  less  mental,  it 
sinks  in  the  scale.  The  skilful  carver  in  wood  and  stone 
stands  below  the  designer,  but  above  the  carpenter  or  stone 
mason,  and  the  latter  above  the  man  who  mixes  the  mortar  or 
carries  the  hod.  A  utility,  being  a  relation  between  a  want 


38  WEALTH. 

and  a  capacity  to  satisfy  it,  is  not  the  result  merely  of  toil 
and  trouble,  sweat  and  sacrifice;  nor  is  its  amount  measured 
by  them  alone.  In  socialism,  however,  ignorance  expects  to 
bear  sway  and  put  knowledge  and  skill  at  a  discount.  The 
former  proposes  to  average  up  and  to  average  the  latter  down. 
In  that  state  of  society,  the  employees  propose  to  employ  their 
employers  upon  a  level  basis  of  equality  and  fraternity. 

The  father  of  the  science  of  political  economy  says  (Adam 
Smith,  Book  1,  Chap.  8),  "The  produce  of  labor  constitutes 
the  natural  recompense  or  wages  of  Jabor.  In  that 
original  state  of  things  which  precedes  the  appropriation  of 
land  and  the  accumulation  of  stock  the  whole  produce  of  labor 
belongs  to  the  laborer.  lie  has  neither  landlord  nor  master 
to  share  with  him." 

But  labor,  if  ignorant  and  unskilled.may  starve  upon  its  en- 
tire product. 

In  the  original  state  of  things,  the  North  American  Indian 
was  always  upon  the  verge  of  starvation  when  he  had  about 
two  square  miles  of  land  for  himself  and  each  member  of  his 
family  and  the  sea  to  fish  in  besides.  The  African  savage 
pays  gold  and  ivory  for  glass  beads;  he  could  not  make  them 
if  all  the  materials  lay  heaped  together  at  his  feet.  The 
English  take  cotton  from  India  to  England,  manufacture  it 
into  cloth  at  wages  many  times  greater  than  the  rate  in  India 
return  the  goods  and  undersell  the  native  workman  who 
labors  for  a  mere  handful  of  rice  per  day.  The  Hindoo,  work- 
ing for  eight  cents  a  day  and  boarding  himself,  executed 
earthwork  by  carrying  out  the  material  in  a  basket  upon  his 
head.  When  furnished  a  wheelbarrow,  he  sought  to  put  it 
upon  his  head  also.  Labor,  of  itself,  does  not  know  enough  to 
trundle  a  wheelbarrow.  And  indeed  it  seems  that  the  human 
mind  was  too  stupid  to  invent  one  until  its  invention  by 
Pascal  (E.  About). 

When  New  England  was  first  settled,  the  total  number  of 
Indians  within  its  limits  were  from  thirty  to  fifty  thousand 
divided  into  a  number  of  hostile  tribes.  They  could  have 
hardly  subsisted  at  all,  without  the  possession  of  a  certain 
amount  of  knowledge  and  skill.  They  lived  in  huts  (wigwams) 
made  of  bark  or  mats,  laid  over  a  frame  work  of  branches  of 
trees  stuck  in  the  ground.  Their  habitations  were  removed 
from  time  to  time  when  the  location  became  too  filthy  even 


WEALTH.  39 

for  an  Indian.  Their  furniture  was  vessels  of  basket  work, 
baked  earth,  hollowed  wood  or  stone,  with  mats  and  furs 
for  hangings  and  for  couches.  Their  food  was  fish,  game, 
nuts,  berries,  roots,  Indian  corn,  squash,  pumpkin,  a  species 
of  bean  and  one  of  sunflower  having  an  esculent  tuberous 
root.  They  had  no  salt,  nor  bread,  and  no  drink  except  water 
and  in  its  season  the  sap  of  the  rock  maple  tree.  They  had 
tobacco.  Their  tools  for  husbandry  were  a  hoe  made  of  a 
clam  shell,  or  a  moose's  shoulder  blade  fastened  to  a  wooden 
handle.  Fish  were  taken  with  lines  or  nets  made  of  the 
twisted  fibers  of  the  dogbane  or  of  the  sinews  of  the  deer.  Hooks 
were  made  of  sharpened  bones  of  fishes  and  birds.  The  axe, 
hatchet,  chisel,  and  gouge  were  of  hard  stone  brought  to  an 
edge  by  friction  upon  another  stone.  The  helve  of  the 
axe  or  hatchet  was  attached  either  by  a  cord  drawn  tight 
around  a  groove  in  the  stone,  or  being  cleft  while  still  un- 
severed  from  the  tree,  it  was  left  to  grow  until  it  closed  fast 
around  the  inserted  tool.  Bows  were  strung  with  the  sinews 
and  twisted  entrails  of  the  moose  and  deer.  Arrows  and 
spears  were  tipped  with  bone,  with  the  claws  of  the  larger 
species  of  birds,  or  with  artificially  shaped  triangular  pieces 
of  flint.  Besides  the  stone  hatchet,  as  a  weapon  of  offense, 
was  the  tomahawk  which  was  merely  awooden  club  two  feet 
or  more  in  length,  terminating  in  a  heavy  knob.  Boats  were 
made  of  birch  bark,  or  of  a  log,  hollowed  out  by  fire  and  by 
the  application  of  rude  stone  tools  acting  upon  the  charred 
surface.  Their  clothing  was  undressed  skins  of  deer  or  other 
wild  animals  for  winter  attire;  in  summer,  the  men  wore 
about  the  middle  only  a  piece  of  deerskin  from  which  the 
hair  had  been  removed  by  friction.  Moccasins  reaching 
above  the  ankle,  of  thin  dressed  deerskin  or  of  the  moose's 
skin,  afforded  protection  to  the  feet.  Their  personal  orna- 
ments consisted  of  greasy  paint  laid  in  streaks  upon  the  skin; 
of  mantles  and  headgear  made  of  feathers;  of  earrings,  nose 
rings,  bracelets  and  necklaces  of  bone,  shells,  and  shining 
stones,  and  pieces  of  copper,  sometimes  in  plates  sometimes 
strung  together.  (Palfrey,  His.  of  New  England.) 

Such  is  the  inventory.  The  Indian  had  no  landlord  nor 
master  to  share  with  him,  and  paid  no  taxes.  But  they  were 
liable  to  be  killed  and  sometimes  eaten  by  their  enemies.  . 

In   contrast  with  this,  in    1880  another  race  of  people  in- 


40  WEALTH. 

habited    New   England    and  their  numbers  were    3,810,523. 
Their  wealth  pro  rata  would  compare  very  favorably  with 
that  of  their  predecessors.     This  litter  population  and  wealth 
grew  up  under  the  rules  of  order  and  law,  the  appropriation 
of  land,  the  accumulation  of  stock  and  the  payment  of  agreed 
wages      The  afflicted  together  with  the  dependent   paupers 
supported  by  public  charity  equaled  the  total  number  of  the 
Indians  as  above  given.     And  if  any  pauper  had  been  dressed 
in   summer  with  a  strip  of  deerskin,  a  pair  of  moccasins,  a 
headdress  of  feathers  and  a  coat  of  earthy  paint,   and  had 
been  fed  on   corn  and  beans  without  salt,  it  would  have  been 
a  case  for  the  Humane  Society.     The  Indian  belonged  to  the 
stone  age.      He  lacked  civil  institutions,  personal  rights  and 
property  rights  limited  and  protected  by  law;  and  also,  he 
lacked  knowledge  and  skill.     Without  these,  labor  is  naught. 
It  took  him  over  three  weeks  to  make  his  boat  out  of  a  log 
of  wood  by  the  aid  of  fire  and  tools  made  of  stone.     And  in 
that  rocky  soil  a  hoe  made  of  a  clam  shell  was  of  little  avail. 
In    1834,    Mr.  Murray,  a  Scotchman,  visited  America  and 
after  reaching  Fort  Leavenworth  on  the  Missouri,  he  there 
joined  a  band  of  Pawnees  who  were  going   out  upon   the 
plains  to  hunt  buffalo.     He  describes  these  Indians  and  their 
habits  at  length.     His  account  of  an  Indian  dandy,  the  son  of 
a  chief,  may  be  summarized  as  follows:     When  there  was  no 
buffalo  hunt,  he  began  his  toilet  by  greasing  and  smoothing 
his  whole  person  with  fat,  which  he  afterwards  rubbed  per- 
fectly dry,  leaving  the  skin  slick  and  glossy;  he  then  painted 
his  face  vermilion,  with  a  stripe  of  red  also  along  the  crown 
of  his  head;  he  then  proceeded  to  dress  his  scalplock  which 
was  plaited  into  two  pigtails;  he  then  filled  his  ears,  which 
were  bored  in  two  or  three  places,  with  rings  and  wampum, 
and  hung  several  strings  of  beads  around  his  neck,  then  some- 
times painting  stripe.8    of    vermilion  and  yellow   upon    his 
breast  and  shoulders,  and  placing  armlets  above  his  elbows 
and  rings  upon  his  fingers,  he  proceeded  to  adorn  the  nether 
man  with  a  pair  of  moccasins,  some  scarlet  leggings  fastened 
to  his  waist  belt  and  bound  around  below  the    knee    with 
garters  of  beads  four  inches  broad.     Then  having  thoroughly 
examined   himself  and  his  toilet  being  arranged  to  his  satis- 
faction, one  of  the  women  or  children  led  out  his  horse  before 
the  tent,  etc.,  etc. 


WEALTH.  41 

Among  the  Pawnees,  soap  was  an  unknown  quantity,  and 
the  use  of  water  limited  to  drinking  and  cooking;  therefore, 
where  filth  and  lousiness  (of  two  kinds)  were  extreme  the 
utility  of  grease  applied  to  the  skin  met  a  corresponding  want, 
while  red  paint  served  for  ornamental  purposes,  and  a  pocket 
mirror  stuck  in  the  belt  which  held  up  the  warrior's  breech 
clout  and  leggings,  enabled  him  not  only  to  admire  his  own 
beauties  but  also  to  locate  his  parasites. 

Another  definition  has  been  given  to  natural  wages,  and 
apparently  the  opposite  of  that  already  given,  namely,  (Ricardo, 
chapter  5).  "The  natural  price  of  labor  is  that  price 
which  is  necessary  to  enable  the  laborers,  one  with  another, 
to  subsist  and  perpetuate  their  race  without  increase  or 
diminution."  This  means  labor  as  properly  defined — not 
labor  combined  with  knowledge  and  skill.  It  means  labor 
proper,  such  as  regards  tools  and  machinery  as  its  rival  and 
enemy.  This  definition  is  in  fact  the  same  as  the  former  one. 
Doubtless  the  North  American  Indian  had  inhabited  the  con- 
tinent for  ages:  and  the  limit  of  their  numbers  had  been 
reached.  No  more  than  a  few  thousand  could  subsist  under 
the  regime  of  natural  wages,  whether  regarded  as  covering  the 
entire  product  of  labor  or  as  only  enough  to  enable  the  laborer 
to  exist  and  perpetuate  his  species.  The  existence  ^ ' 0~~ 
large  amount  of  wealth  implies  the  existence  of  a  large  amount 
of  wants  and  of  the  means  to  satisfy  them.  These  are  the 
results  of  knowledge.  The  Pawnee's  knowledge  of  wants 
was  limited;  he  felt  hunger  and  satisfied  it  by  gorging  himself 
with  raw  buffalo  liver  or  meat;  but  he  failed  to  know  that  he 
needed  a  fine  toothed  comb,  soap,  and  many  other  things 
commonl-y  thought  useful. 

IV. 

THE  SUM  OF  WEALTH. 

In  making  out  a  tax  list,  the  usual  method  is  to  set  down 
the  property  of  every  person  and  corporation  with  its  value 
in  money  and  the  aggregate  is  considered  as  the  sum  of 
wealth.  Such  an  aggregate  would  be  the  sum  of  the  national 
wealth,  unless  the  public  lands  and  other  public  property  are 
also  to  be  included.  The  climate,  the  rivers  and  harbors, 
the  public  highways,  the  character  of  the  people,  the  laws 
and  institutions  of  the  country  and  the  like,  are  sources  of 
wealth;  only  property  having  a  money  value  is  wealth. 


4-2  WEALTH. 

The  quantity  of  the  different  kinds  of  property  may  be 
measured  by  weight,  length,  number,  superficial  area,  or 
cubic  contents,  but  their  value  is  not  measured  in  that  way. 
Two  acres  of  land,  two  yards  of  cloth,  two  cows,  two  pounds 
of  tea,  &c.,  may  or  may  not  be  of  equal  value.  One  acre  of 
land  may  be  fertile,  near  market  or  otherwise  very  valuable, 
while  the  other  might  be  wholly  different.  And  so  also  different 
kinds  and  qualities  of  commodities  may  differ  in  value.  And  as 
to  articles  of  the  same  kind  and  quality,  the  more  abundant 
they  become,  the  less  is  their  utility  per  unit  of  quantity. 
If  the  supply  of  a  useful  object  should  exceed  the  demand, 
wealth  would  not. continue  to  increase  as  the  supply  became 
more  and  more  excessive.  In  the  early  days  in  Australia, 
mutton  was  worth  nothing;  the  sheep  were  only  valuable  for 
their  wool  and  tallow.  And  elsewhere  cattle  have  been  of 
no  value  except  for  their  hides,  horns,  and  tallow.  In  some 
parts  of  this  country,  when  first  settled,  farm  products  have 
been  so  abundant  as  to  bear  nominal  prices,  and  fruit  left  to 
rot  on  the  ground.  During  the  Mexican  war,  the  country 
between  the  Nueces  and  the  Rio  Grande  was  full  of  wild 
horses,  so  that  a  horse  was  worth  only  a  nominal  sum.  Gen. 
Grant,  then  a  young  officer  lost  three  at  one  time;  whereupon 
another  officer  remarked,  when  the  fact  was  mentioned,  ':  Yes, 
I  heard  Grant  lost  five  or  six  dollars  worth  of  horses  the 
other  day." 

Things  are  -measured,  as  wealth,  by  measuring  their  value. 
One  thing  is  worth  so  much  more  or  less  than  another;  and, 
therefore,  as  wealth,  is  that  much  more  or  less  than  the  other. 
This  being  true  it  is  not  correct  to  say  (De  Laveleye).  "It  is 
the  abundance  of  commodities,  and  not  their  money  value, 
which  constitutes  wealth.  The  greater  the  abundance  of  use- 
ful objects,  the  less  will  be  their  price  and  money  value;  but 
meanwhile  wealth  is  increased."  If  the  abundance  is  such 
as  to  exceed  the  demand,  or  if  a  thing  whether  abundant  or 
not  is  not  wanted  at  all,  such  abundance  does  not  increase 
wealth.  The  increase  would  take  place  if  the  demand  kept 
pace  with  the  supply,  otherwise  not.  It  often  occurs  that  a 
moderate  crop  measures  more  as  wealth  than  a  very  abundant 
one.  A  superfluity  loses  its  use  value  even  to  the  consumer. 
Useful  objects,  so  called,  are  not  useful  unless  they  are  wanted; 
and  the  more  they  are  wanted  the  more  useful  they  become. 


WEALTH.  43 

The  author  above  quoted,  also  says:  "The  number  and 
nature  of  rational  wants  varies  with  the  climate  and  the  state 
of  civilization.  It  may  be  good  to  satisfy  more  and  more 
wants,  in  proportion  as  the  means  of  producing  useful  com- 
modities are  improved.  Still  it  is  not  true,  that  the  progress 
of  civilization  must  be  measured  by  the  number  of  wants 
satisfied."  "Ancient  philosophy,  as  well  as  the  Christian 
code,  preached  the  moderation  of  wants,  in  accordance  with 
the  fine  maxim  of  Seneca.  "If  you  would  make  a  man  rich, 
you  need  not  increase  his  wealth,  but  rather  diminish  his 
desires."  This,  in  economic  terms  is  the  same  as  to  say,  if 
you  would  make  a  man  or  community  rich,  you  need  not 
increase  the  supply,  but  rather,  diminish  the  demand.  Ac- 
cording to  another  view,  (About,  Say)  "  the  most  civilized 
man  is  he  who  produces  and  consumes  the  most."  This 
requires  a  proviso;  that  he  consumes  less  than  his  income. 
In  the  slave  States  wealth  did  not  accumulate  as  it  did  in  the 
free  States,  because  there  was  no  large  body  of  consumers. 
If  the  mass  of  the  people  are  educated  and  skilled  laborers, 
then  wealth  abounds,  because  high  wages  cause  a  great 
demand.  The  Chinese  in  the  Pacific  States  have  had  a  simi- 
lar effect  upon  their  prosperity  to  that  of  slavery.  Their  in- 
dustry is  great,  but  their  frugality  is  excessive;  and  enterprise 
languished  for  the  want  of  an  adequate  demand. 

Under  the  head  of  "false  wants"  and  "  false  wealth"  De 
Laveleye  calls  attention  to  the  use  of  alcohol,  opium  and  to- 
bacco, and  from  the  facts,  says,  "The  highest  part  of  the 
human  race  spends  annually  some  £400,000,000  to  poison 
itself  in  large  or  small  doses."  Also,  "According  to  calcula- 
tions made  in  the  United  States,  in  ten  years,  alcohol  imposed 
on  the  country  a  direct  expenditure  of  about  £300,000,000, 
and  an  indirect  expenditure  of  a  similar  sum.  It  has  sent 
100,000  orphans  to  the  asylums,  it  has  brought  138,000  per- 
sons to  the  prison  or  work-house,  it  has  led  to  10,000  suicides 
and  has  made  200,000  widows  and  1,000,000  orphans."  Alco- 
hol and  tobacco  are  largely  consumed  by  those  who  make 
loud  complaints  about  their  poverty  and  about  the  unequal 
distribution  of  wealth. 

In  addition  to  the  idiots,  insane,  paupers  and  criminals 
made  so  by  the  use  or  abuse  of  alcohol  and  the  narcotics,  if 
it  were  also  known  how  much  other  poverty  has  been  caused 


44  WKA.I/TH. 

by  tliem  and  also,  by  idleness,  extravagance  and  other  vices. 
some  part  of  the  tears  shed  by  sentimental  political  economy 
over  poverty  and  the  unequal  distribution  of  wealth  might 
Be  saved.  The  science  of  wealth  has  been  much  studied; 
but  the  science  of  poverty  has  been  neglected.  There  is  no 
virtue  in  poverty,  unless  it  was  honestly  come  by.  The  feast 
to  the  prodigal  son  was  a  pure  gratuity. 

Since  everything  which  the  law  tolerates  and  protects  as 
property — whether  it  be  poison  or  not — is  wealth,  if  it  has  a 
money  value,  the  sum  of  wealth  includes  all  the  different  kinds 
of  property  estimated  in  money. 

But  it  is  said  in  political  economy,  (Walker)  that  property 
is  a  word  with  which  it  has  nothing  to  do.  This  assertion 
implies  that  the  right  to  possess  and  enjoy  an  object  of  desire 
is  not  an  essential  element  in  wealth,  and  also,  that  it  con- 
sists of  capacities  to  be  useful  regardless  of  the  corresponding 
wants  and  desires  and  irrespective  of  the  persons  to  whom 
the  things  may  be  useful.  Following  up  this  idea  it  is  as- 
serted (Progress  and  Poverty):  "By  the  enactment  of  the 
sovereign  power,  debts  might  be  cancelled  and  land  resumed  as 
the  common  property  of  the  whole  people  without  the  aggre- 
gate wealth  being  diminished  by  a  pinch  of  snuff."  And  in 
illustration  of  this  doctrine  it  is  said  (Mill),  "A  mortgage 
for  £1,000  on  a  landed  estate  may  be  wealth  to  the  mortgagee 
but  it  is  not  wealth  to  the  country.  If  the  engagement  were 
annulled  the  country  would  be  no  poorer  nor  richer.  Speaking 
nationally,  the  mortgage  is  not  itself  wealth,  but  merely  gives 
A.  a  claim  to  a  portion  of  the  wealth  of  B.  It  is  wealth  to 
A.,  but  in  fact  is  a  joint  ownership  to  the  extent  of  £1,000  in 
the  land  of  which  B.  is  nominally  the  sole  proprietor;  also, 
stocks  held  by  citizens  in  the  funds  of  foreign  countries  and 
other  debts  due  to  them  from  abroad  may  be  national  wealth, 
but  it  forms  no  part  of  the  collective  wealth  of  the  human 
race." 

It  is  thus  asserted  that  debts  form  no  part  of  the  "  sum  of 
wealth"  or  the  "collective  wealth  of  the  human  race,"  and 
that  their  cancellation  would  not  alter  the  sum  of  wealth  by 
a  pinch  of  snuff.  And  the  statement  is  illustrated  and  sup- 
posed to  be  proved  by  the  case  of  a  mortgage  from  B.  to  A. 
for  £  1,000.  Now  a  mortgage  is  a  mere  incident  to  and  se- 
curity for  a  debt  which  is  the  principal  thing.  A  mortgage 


WEALTH.  45 

for  £1,000  gives  no  joint  ownership  to  A.  in  the  land  of  B.  to 
the  extent  of  £1,000.  Any  tyro  in  the  law  knows  this.  So 
that  at  the  inception  of  this  debt  there  was  £1,000  in  money 
in  the  hands  of  B.  and  in  the  hands  of  A.  there  was  a  promise 
by  B.  to  repay  the  money  with  interest  at  maturity,  together 
with  the  mortgage  as  a  security.  The  only  two  items,  there- 
fore, to  consider  in  this  typical  illustration  are  the  debt,  and 
the  sum  of  money  loaned.  Now  the  fact  is  that  each  of  these 
two  items  are  worth  £1,000.  The  note  or  bill  broker  makes 
merchandise  of  such  negotiable  paper  and  it  is  readily  sale- 
able at  par,  and  yet  B.  has  the  £1,000  in  money.  The  present 
value  of  a  debt  due  in  the  future  bearing  the  customary  rate 
of  interest  is  worth  its  face,  if  certain  to  be  paid;  if  uncertain, 
it  is  worth  so  much  less  down  to  nothing.  Such  is  the  fact, 
and  if  the  debt  were  cancelled  there  would  be  a  loss  as  great 
as  if  B.  cast  the  money  into  the  sea  or  otherwise  destroyed  it. 
.  A  man's  credit  is  defined  to  be  his  reputation  derived  from 
the  confidence  of  others  (Webster);  he  is  reputed  to  be  a  man 
worthy  of  trust  and  confidence.  If  his  credit  is  great  he  need 
not  give  a  mortgage  or  other  security.  Bankers  are  trusted 
with  millions  without  security.  In  commerce,  the  freight  or 
cargo  is  shipped  and  bills  are  drawn  against  the  proceeds. 
The  banker  cashes  these  bills  and  other  shipments  are  made. 
Without  credit,  the  banker  would  not  be  trusted  by  his  de- 
positors, the  shipper  would  not  trust  the  consignee,  nor  the 
banker  trust  either  of  them.  Without  credit,  the  producer 
would  not  be  trusted  with  any  part  of  the  means  or  machinery 
of  production,  and  capital  would  not  pay  labor  in  advance  nor 
labor  wait  for  its  pay  until  the  work  was  done;  without  credit 
all  the  wheels  of  industry  and  commerce  would  stop  at  once. 
In  this  country  the  credit  transactions  done  annually  through 
the  banks,  amount  to  about  sixty  thousand  millions  of  dollars. 
The  credit  transactions  carried  through  clearing  houses  for 
the  year  ending  Sept,  30,  1889,  amounted  to  $54,494,754,- 
586.00;  of  which  only  five  per  cent,  was  paid  as  balances  in 
money.  Add  to  this  all  other  credit  transactions  done  among 
the  people. 

The  annulment  of  all  debts  would  be  the  instantaneous  and 
total  destruction  of  all  credit.-  And  instead  of  the  cancella- 
tion of  all  debts  making  no  alteration  in  the  sum  of  wealth, 
it  would  knock  the  bottom  out  of  the  collective  wealth  of  the 


46  WEALTH. 

human  race.  The  word  panic  wholly  fails  to  express  the 
idea. 

If  wealth  consisted  only  of  ';  material  objects,"  or  utilities 
embodied  in  "  material  objects"  as  possessing  capacities  to  be 
useful,  then  such  things  would  be  as  much  wealth  in  one 
place  as  in  another;  food  contains  as  much  nutrition  ami 
clothing  as  njuch  warmth  in  the  hands  of  the  producer  as  in 
the  hands  of  the  consumer;  coffee  in  Brazil  or  Java,  tea  in 
China,  cotton  in  America,  sugar  in  Cuba,  wheat  in  Dakota, 
Australia  etc.,  would  measure  as  much  as  wealth,  as  they 
would  in  the  hands  of  the  consumer.  And  if  wealth  consists 
only  of  "  material  objects"  then  no  debts  are  wealth,  the 
above  debt  to  A.  for  £1,000  secured  by  a  mortgage  was  not 
wealth  at  all,  not  even  to  A.  It  was  not  a  material  product 
of  labor;  it  is  not  distributed  or  consumed. 

Credit  exerted,  gives  rise  to  credits  or  debts;  the  credit 
being  the  right  to  demand  payment  at  maturity:  and  the  debt, 
the  duty  to  pay  at  the  time  agreed  upon.  These  cannot  be 
balanced  off  against  each  other  and  the  result  called  zero. 
Debts  due  in  the  future  are  not  debts  due  now;  they  bear  no 
weight  upon  the  debtor  until  they  mature.  In  the  meantime 
events  happen;  the  sun  shines;  the  seasons  follow  one  another: 
the  crop  ripens;  the  product  is  produced;  the  train  arrives: 
the  ship  comes  home;  and  wealth  is  created  or  enhanced  while 
the  debt  is  running  to  maturity.  It  is  said  (Mill,  Book  3, 
Chap,  ii.)  *'  it  (credit)  cannot  make  something  out  of  nothing. 
How  often  is  an  extension  of  credit  talked  of  as  equivalent 
to  capital  or  as  if  credit  were  actually  capital."  Neither 
credit  nor  any  human  agency  can  create  matter:  but  by  his 
own  definition  wealth  consists  of  '-utilities"  and  credit  can 
create  and  enhance  them  as  well  as  any  other  form  of  capital. 
Credit  can  bridge  over  the  time  between  seed  time  and  har- 
vest: the  time  between  the  raw  material  and  the  finished 
product;  and  the  time  and  distance  between  the  producer  and 
the  consumer. 

Debts  consist  of  "rights"  and  so  also  as  toother  "utilities." 
<  )f  what  utility  is  food  without  the  right  to  eat  it,  or  of  cloth- 
ing without  the  right  to  wear  it  ? 

In  order  to  illustrate  the  nature  of  credit,  instead  of  the 
above  imaginary  case  of  £1,000  between  A.  and  B.,  take  a 
real  one.  Dr.  Franklin,  when  young  and  poor,  having  learned 


WEALTH.  47 

the  printer's  trade,  started  a  printing  house  with  oneMeredeth, 
whose  father  agreed  to  furnish  the  capital.  But  he  failed  to 
do  so;  and  one  hundred  pounds  becoming  due  they  were  sued 
and  ruin  was  impending.  Then  two  friends  of  Franklin 
offered  to  him  all  the  money  needed,  but  objected  to  Mere- 
dith. He  was  seen  often  drunk  in  the  streets  and  playing  low 
games  in  ale-houses.  He  was  bought  out,  an<\  Franklin  in- 
stalled as  sole  proprietor.  The  loans  made  to  him  were  not 
even  a  lien  upon  the  printing  house;  it  was  the  sole  property 
of  Franklin.  The  debts,  which  could  not  affect  Franklin 
until  maturity,  were  worth  their  face,  because  they  were  paid 
in  full;  and  yet  Franklin  had  the  printing  house  as  his  own 
property.  His  credit  was  ''actually  capital"  to  him,  and  it 
made  him  "something  out  of  nothing."  And  it  added  to  the 
sum  of  wealth;  without  credit  the  printing  house  would  have 
been  closed  up  and  the  types,  &c.,  would  have  figured  small 
in  the  sum  of  wealth  when  knocked  into  pi  under  the  Sheriff's 
hammer.  The  rich  bankers  make  millions  out  of  their 
credit;  and  every  man  in  business  finds  his  credit  as  much 
a  source  of  wealth  to  him  as  his  monied  or  other  capital. 

It  is  asserted  without  proof  and  probably  regarded  as  an 
axiom  (Mill,  Book 3, Chap,  ii  )  that,  "the  same  sum  cannot  be 
used  as  capital  both  by  the  owner  and  also  by  the  person  to 
whom  it  is  lent;  that  all  capital  (not  his  own)  of  which  any 
person  has  really  the  use,  is  and  must  be  so  much  subtracted 
from  the  capital  of  some  one  else."  Banks  receive  money  on 
deposit  payable  on  demand;  they  keep  the  money  safely,  take 
all  the  risk  of  counterfeits  and  all  the  trouble  of  counting  and 
handling  the  money,  and  often  pay  interest  upon  the  deposit 
in  addition.  Thus  the  depositor  has  a  better  use  of  his  money 
than  if  it  were  deposited  in  his  own  till.  He  pays  it  out  by 
checks  upon  his  banker.  At  the  same  time  the  money  has  a 
great  use  value  to  the  banker.  He  lends  out  a  large  per  cent, 
of  his  deposits  and  thereby  makes  a  great  profit .  The  New 
York  banks  out  of  deposits  amounting  to  about  four  hundred 
millions  of  dollars  all  payable  on  demand,  lend  safely  as  that 
much  additional  capital  about  three  hundred  millions  of  dol- 
lars and  make  a  profit  out  of  it  at  the  rate  of  banking  dis- 
count prevalent  there.  Credit  enables  "the  same  sum  to  be 
used  as  capital  both  by  the  owner  and  the  person  to  whom  it 
is  lent."  The  element  of  time  cuts  a  figure  in  a  mass  of 


WEALTH. 

money  all  payable  at  once.  It  is  not  all  demanded  at  once, 
and  the  new  deposits  counterbalance  the  sums  paid  out. 

Credit  is  an  engine  of  great  power.  In  former  times  money 
was  weighed,  counted,  and  examined;  credit  has  changed  this. 
Money  is  paid  out,  deposited  and  'handled  in  the  form  of 
checks  and  other  instruments  of  credit.  Who  could  other- 
wise count  and  pay  over  annually  sixty  thousand  millions  of 
dollars?  Credit  enables  the  bank  of  circulation  to  make  a 
great  profit  by  lending  its  own  notes  payable  on  demand 
without  interest  for  the  notes  of  others  bearing  interest;  and 
the  people  have  made  a  great  profit  by  the  use  of  their  own 
notes  (greenbacks)  as  money. 

Production  properly  consists  in  bringing  a  capacity  to  be 
useful  (a  supply)  within  the  reach  of  a  want  (the  demand). 
And  in  every  step  of  the  process  credit  is  an  important  ele- 
ment. It  is  quite  essential  in  commerce,  and  commerce  has 
enriched  nations  in  all  ages.  The  integrity  of  the  honest  and 
successful  business  man  which  makes  his  word  as  good  as  his 
bond  and  gives  him  credit  often  amounting  to  vast  sums  is  a 
source  of  wealth  to  him  and  hence  to  the  community.  Credit 
is  a  potent  factor  in  production  whether  it  be  called  capital 
or  not.  If  the  word,  capital,  is  restricted  in  its  meaning  to 
the  material  products  of  past  labor,  in  order  to  furnish  a  basis 
for  the  assertion  (JVJarx.)  that  capital  consists  of  surplus 
labor  value  filched  from  the  laborer,  nothing  is  gained  by  it. 
Credit  still  continues  to  be  an  element  in  production,  in  spite  of 
definitions.  And  credit,  no  matter  how  great,  is  a  possession 
which  was  filched  from  nobody. 

In  this  country,  it  is  useless  to  assert  that  credit  is  not  a 
source  of  wealth,  or  that  bonde,  stocks,  bills  of  exchange, 
notes,  and  bank  accounts,  and  other  credits,  patents,  copy- 
rights, land  exclusive  of  the  improvements  thereon,  mines  or 
deposits  of  metals,  minerals,  coal,  petroleum  and  natural  gas, 
growing  timber,  grass,  wild  fruits,  &c.,  are  not  wealth;  or 
that  nothing  is  wealth  excepting  the  material  products  of 
labor.  And  it  does  not  prove  the  correctness  of  such  a  defini- 
tion to  assert  contrary  to  the  fact,  that  if  all  debts  were  an- 
nulled and  all  credit  destroyed  and,  indeed,  all  private  rights 
wiped  out,  except  as  to  such  material  products,  that  such  a 
cataclysm  would  not  alter  the  sum  of  wealth  or  the  collective 
wealth  of  the  human  race.  Utilities  only  exist  in  the  pre- 


WEALTH.  49 

sence  of  rights  to  possess  and  enjoy  them,  in  the  absence  of 
which  the  utilities  vanish  and  disappear 

If  the  existing  state  of  society  should  be  overthrown,  it 
would  be  necessary  to  make  out  a  new  schedule  of  the  items 
of  wealth,  based  upon  the  subsequent  and  new  -order  of 
things.  And  then,  as  now,  the  question  whether  a  thing  was 
wealth  or  not,  would  not  depend  upon  a  definition  framed 
contrary  to  the  truth.  Nor  could  it  be  proved  then,  nor  can 
it  be  proved  now,  that  the  rights  of  persons  and  of  property 
as  established  by  law  are  unequal,  unfair  and  unjust  by  a  false 
definition  of  wealth  intentionally  adopted  for  the  purpose  of 
an  attack  by  stealth  upon  the  settled  order  of  things.  What 
is  in  fact  wealth  now  is  one  thing,  what  ought  to  be  wealth  is 
another. 

In  a  state  of  anarchy,  or  barbarism  the  items  of  wealth  and 
the  number  to  share  it  are  liable  to  be  small . 

And  in  the  pastoral  state  two  pious  kinsmen,  Abraham  and 
Lot,  were  compelled  to  separate  for  the  sake  of  peace  and  to 
find  scope  enough  for  each. 

In  any  system  of  socialism  or  communism  where  all  the 
land  and  capital  may  be  owned  by  the  State  and  everybody 
its  tenant  and  hired  laborer  upon  some  fixed  basis  of  rent  and 
wages,  the  items  properly  included  in  the  sum  of  wealth 
might  amount  to  more  or  less  than  the  total  wealth  existing 
under  the  present  state  of  things.  It  is  claimed  (Progress 
and  Poverty  Book  9,  chap.  4.)  that  land  confiscation  alone 
would  bring  about  an  enormous  increase  of  wealth. 

V. 

THE    OWNERS    OF  WEALTH. 

Since  wealth  consists  of  property  having  a  money  value, 
its  acquisition,  enjoyment,  and  disposal  are  governed  by  the 
law  of  property;  which  law  is  an  expression  of  the  general 
opinion,  founded  upon  experience,  that  the  method  or  system 
thereby  adopted  is  the  one  best  suited  to  promote  the  general 
welfare. 

But  the  science  of  political  economy  having  defined  wealth 
as  consisting  of  utilities  embodied  in  material  objects  by 
labor,  when  it  comes  to  treat  of  distribution,  sets  up  a  tribunal 
of  its  own  to  try  all  titles  to  property  and  decide  upon  their 
merits. 


50  WEALTH. 

A-  the  material  objects  (land,  raw  material)  exist  before 
any  labor  is  bestowed  upon  them,  the  laborer  must  acquire 
his  title  to  them  from  some  other  source  than  his  labor.  In 
short,  mankind  did  not  make  the  earth,  therefore,  what  title 
have  they  or  any  of  them  to  it,  or  any  part  of  it. 

It  is  asserted  in  political  economy  (Mill,  Book  2.  chap.  2). 
"The  essential  principle  of  property  being  to  assure  to  all 
persons  what  they  have  produced  by  their  labor  and  accumu- 
lated by  their  abstinence,  this  principle  cannot  apply  to  the 
raw  material  of  the  earth.  If  the  land  derived  its  productive 
power  wholly  from  nature  and  not  at  all  from  industry,  or  if 
there  were  any  means  of  discriminating  what  is  derived  from 
each  source,  it  not  only  would  not  be  necessary,  but  would  be 
the  height  of  injustice  to  let  the  gift  of  nature  be  engrossed 
by  individuals.  The  use  of  land  in  agriculture  must  indeed, 
for  the  time  being,  be  exclusive;  the  same  person  who  has 
plowed  and  sown  must  be  permitted  to  reap;  hut  the  land 
might  be  occupied  for  one  season  only  as  among  the  ancient 
Germans;  or,  it  might  be  periodically  redivided  as  population 
increased;  or,  the  State  might  be  the  landlord  and  the  culti- 
vators tenants  under  it  either  on  lease  or  at  will." 

Since  the  raw  material  of  the  earth  is  not  the  product  of 
human  labor,  a  title  to  it  must  be  derived  from  some  other 
source.  "Who  is  entitled  to  the  raw  material  of  the  earth? 
The  producer  of  it,  without  doubt.  Who  made  it?  God. 
Then,  laborer,  begone."  If,  however,  amaterial  object  were  a 
gift  to  the  first  taker  or  occupant  as  a  reward  for  his  labor  in 
taking  possession,  then  such  title  would  be  good  as  against 
all  others  having  no  title  whatever. 

But  it  is  asserted  that  the  raw  material  of  the  earth  is  tin- 
gift  of  nature  to  all  men  alike,  and  that  it  is  the  height  of  in- 
justice to  let  such  gift  be  engrossed  by  individuals.  What 
are  the  evidences  of  such  a  gift?  Why  have  not  the  rest  of 
animated  nature  as  good  a  right  to  live  and  enjoy  the  above 
gift  as  man?  If  to  be  born  into  the  world  implies  a  gift  from 
nature  of  a  right  to  life  and  the  means  to  support  it,  why  are 
so  many  kinds  of  animal  life  preyed  upon  by.  others?  If 
every  deer  and  rabbit  that  is  born  is  entitled  to  life  and  a 
livelihood,  what  rights  belong  to  the  carnivorous  animals? 
And  if  a  lion,  tiger,  or  crocodile,  in  order  to  sustain  life,  eats 
men  or  infants,  is  such  food  a  gift  of  nature  to  them?  A«-- 


WEALTH.  51 

cording  to  nature,  all  her  gifts  are  the  reward  of  superior 
force  and  cunning.  And  the  man  who  claims  the  live  ani- 
mal, fish,  or  reptile  as  the  gift  of  nature  to  him,  or  as  the  pro- 
duct of  his  labor,  has  no  better  title  than  the  man  eating  tiger 
to  the  captured  Hindoo.  -By  reason  of  his  superior  cunning 
man  captures  the  fishes,  who  inhabit  another  element:  not 
only  for  food,  but  also  for  mere  sport.  The  gifts  of  nature 
do  not  appear  to  be  based  at  all  upon  love,  mercy,  or  any 
sort  of  sentimentalism.  Well  may  the  little  bird  sing  in  the 
tropical  forest  when  daylight  appears,  and  the  hell  be- 
neath him  has  no  longer,  for  that  day  at  least,  any  further 
power  to  destroy  him. 

If  man  has  a  title  to  the  earth  as  against  the  rest  of  ani- 
mated nature,  because  of  his  superior  force  and  cunning,  then 
those  who  are  superior  to  the  rest  in  these  respects  have  the 
best  title.  The  red  man,  the  negro,  and  all  other  savage  or 
inferior  races  must  and  ought  to  give  way  to  their  superiors. 
And  men  of  the  same  race  are  endowed  by  nature  with  very 
unequal  powers  both  physical  and  mental,  hence  the  so  called 
"gift"  was  not  made  to  all  of  them  jointly  and  equally.  If 
nature  had  otherwise  intended,  she  would  have  made  her  gift 
effectual.  She  may  have  intended  that  everyone  should  have 
the  benefit  of  such  .natural  or  acquired  powers  as  he,  may 
possess;  but  there  is  no  evidence  that  nature  '"gifted"  the  per- 
son who  is  physically  or  mentally  weak,  lazy,  shiftless,  im- 
provident, extravagant,  &c.,  with  a  right  to  demand  from 
others  an  equal  support  and  maintenance. 

And  the  Scriptures  fail  to  show  that  the  dominion  given  to 
man  over  the  earth  and  all  its  contents  was  made  to  all  men 
equally  or  jointly.  God  promised  to  Abraham  to  give  to  his 
seed  the  land  of  the  Canaanites;  and  after  the  flood  an  effort 
to  proceed  upon  a  communistic  basis  was  defeated  by  the 
confusion  of  tongues.  And  later  on  it  was  said:  Thou  shalt 
not  covet  thy  neighbor's  house.  For  the  imagination  of 
man's  heart  is  evil  from  his  youth,  and. he  would  prefer  to  rob 
his  neighbor  of  his  house  then  to  go  out  upon  wild  land  and 
build  one  of  his  own.  It  was  to  furnish  a  pretext  for  such 
coveting  that  the  above  idea  of  a  gift  of  nature  to  all  men  in 
common,  was  invented. 

If,  however,  the  earth  really  belonged  to  all  men  alike,  and 
a  tribe  or  race  of  men  could  by  the  implied  or  express  consent 


52  WEALTH. 

of  all  others,  take  and  occupy  a  certain  territory  as  their  own, 
and  as  and  for  their  share  in  the  whole,  then  one  man  might 
do  the  same.  Or,  if  such  tribe  or  nation  by  force  and  fraud 
seized  upon  and  held  as  their  own  a  certain  portion  of  the 
earth,  and  a  division  were  once  made  among  them,  then  the 
honesty  which  is  supposed  to  reside  among  thieves,  would 
require  that  such  division  should  be  ever  afterwards  acquisced 
in  by  the  whole  gang,  including  all  new  comers;  for  a  society 
is  a  continuing  body  and  remains  the  same  although  its  mem- 
bers change  continually.  If  a  re-division  were  made  even- 
time  there  was  a  new  number,  no  other  business  could  be 
transacted.  If  that  gang  all  died  at  once  or  were  dissolved, 
then  the  next  one  could  make  any  new  or  different  arrange- 
ment which  might  be  agreeable  to  them. 

If  every  person,  as  soon  as  born,  owned  a  life  interest  in  an 
equal  share  of  the  earth,  or  only  in  that  part  of  it  which  was 
held  or  claimed  by  his  people,  his  share  in  every  material 
object  would  be  very  small;  and  if  he  attempted,  without  the 
consent  of  the  rest,  as  evidenced  by  some  fundamental  rules 
adopted  by  them,  to  appropriate  to  his  own  use  any  material 
object,  as  a  diamond,  gem,  horse,  cow,  sheep,  or  any  other 
thing,  under  the  pretext  that  he  wanted  to  embody  in  it 
utilities  as  the  product  of  his  labor  or  any  other  pretext  he 
would  probably  be  treated  as  a  thief  or  robber.  He  would 
be  compelled  to  conform  to  the  scheme  which  had  been 
already  adopted  and  live  according  to  it,  until  it  was  changed 
by  the  act  of  the  majority,  or  of  those  who  had  the  power  to 
change  it.  It  would  avail  him  nothing  to  sling  dynamite  or 
otherwise  express  his  disgust. 

As  to  the  scheme  which  ought  to  be  adopted  in  such  case, 
opinions  have  differed.  Some  have  thought  that  everything 
should  always  lie  open  and  subject  to  a  general  scramble 
where  each  one  wTould  have  all  he  could  obtain  and  retain. 
Something  of  this  kind  is  seen  in  a  new  mining  camp  where 
every  man  goes  fully  armed  and  there  is  no  other  law,  until 
certain  rules  are  adopted  in  a  miners'  meeting  to  violate 
which  afterwards  is  certain  death.  In  such  a  rush  for  the 
grand  bonanza,  killing  is  a  twro  handed  game.  Another 
scheme  is  to  hold  everything  always  in  common.  This  i>  - 
pecially  favored  by  those  who  have  nothing,  and  love  idleness. 
The  case  of  Ananias  and  his  wife  is  an  authority  against  it. 


WEALTH.  53 

Another  plan  would  be  "to  nationalize  the  earth"  or  some 
certain  part  of  it,  lease  it  out  in  parcels  to  the  highest  bidder, 
and  divide  the  net  proceeds  over  the  expenses  of  manage- 
ment, if  there  were  any.  This  method  is  in  practice  in  In- 
dia where  the  people  are  kept  by  it  at  the  starvation  point, 
and  the  tax  on  land  has  to  be  supplemented  by  a  tax  on  salt 
and  perhaps  other  essentials,  in  order  to  raise  enough  to  cover 
expenses.  The  plan  adopted  in  socialism  would  be  entirely 
inadmissable.  According  to  that  scheme  nobody  is  entitled 
to  anything  unless  he  is  a  productive  laborer;  the  usufruct  of 
the  earth  and  all  production  is  divided  among  them  exclu- 
sively. If  all  men  are  joint  owners  of  the  earth,  each  one  is 
entitled  to  his  share  whether  he  works  or  not. 

It  is  said  by  the  social  philosopher  above  quoted  that  "the 
person  who  has  plowed  and  sown  should  be  permitted  to 
reap."  Why  so,  if  the  field  were  not  his  own?  If  his  labor 
necessarily  absorbed  as  wages  the  entire  product,  then  he 
might,  for  the  field  would  be  of  no  value  to  its  owners.  And 
if  it  took  as  much  labor  to  raise  the  crop,  as  it  was  worth, 
whether  it  was  large  or  small,  then  the  tiller  of  the  field 
might  well  be  left  to  raise  all  succeeding  crops.  There 
would  be  no  reason  to  oust  him  in  order  to  let  in  another  to 
undergo  great  toil  and  trouble,  unless  there  was  a  profit  in  the 
land  over  and  above  all  expenses  And  so  also,  as  to  any 
other  kind  of  capital  as  well  as  land.  What  was  the  product 
of  the  man's  labor,  who  cleared  and  prepared  the  field  for 
cultivation?  How  could  he  receive  anything  therefor,  if 
"  the  produce  of  labor  (i.  e.,  the  crop)  constitutes  the  natural 
•recompense  or  wages  of  labor"  in  raising  it?  If  the  field  had 
been  originally  covered  with  valuable  timber  ought  the  man 
who  cleared  the  field  to  be  held  liable  for  destroying  such 
timber  or  converting  it  to  his  own  use?  The  schemes  sug- 
gested, by  the  above  quoted  economist,  of  occupying  the 
land  in  succession  for  one  season  only,  or  by  the  cultivators 
as  tenants  of  the  State  on  lease  or  at  will  have  never  been 
practiced  except  among  barbarians,  or  by  despots  ruling  over 
serfs. 

The  father  of  political  economy  (Adam  Smith)  follows  a 
different  doctrine  from  the  one  above  considered.  He  says 
(Book  1.  chap.  8).  "The  produce  of  labor  constitutes  the 
natural  recompense  or  wages  of  labor.  In  that  original  state 


54  WEALTH. 

of  things  which  precedes  the  appropriation  of  land  and  the 
accumulation  of  stock,  the  whole  produce  of  labor  belongs  to 
the  laborer.  He  has  neither  landlord  nor  master  to  share 
with  him." 

According  to  this  doctrine,  the  earth,  in  the  original  state 
of  things,  belonged  to  nobody,  neither  as  landlord  or  master, 
but  belonged  to  the  first  occupant  or  possessor  as  "  the  gift  of 
nature"  to  him,  provided  he  could  hold  it  The  laborer 
measured  the  quantity  of  labor,  which  gave  to  him  a  title,  in 
his  opinion,  to  the  produce  of  his  labor.  He  claimed  that  he 
could  cut  down  the  finest  tree  in  the  forest,  cultivate  the 
most  fertile  spot,  select  the  most  eligible  situation  for  his 
habitation,  gather  the  best  wild  fruit,  fish  in  the  best  place, 
kill  or  capture  the  best  game,  and  generally  appropriate 
everything  which  he  could  lay  his  hands  upon.  Taking 
possession,  making  his  claim  or  otherwise  spending  toil  and 
trouble  about  them  to  any  extent  no  matter  how  small  made 
all  material  objects  his  as  his  natural  wages.  But  other 
laborers  objected  and  raised  disputes  which  were  settled  by 
the  law  then  in  force,  to  wit,  that  of  the  strongest  and  most 
cunning.  In  that  original  state  of  things,  the  right  to  life, 
liberty,  and  property  all  rested  upon  this  law.  Those  who 
survived  its  operation  were  by  way  of  natural  selection  con- 
sidered to  be  the  fittest. 

In  natural  wages  as  above,  the  laborer  is  entitled  to  the 
whole  produce  whether  the  labor  is  great  or  small.  Hence 
the  act  of  taking  possession  and  holding  the  material  object 
was  sufficient  for  the  purpose.  A  runaway  sailor  picked  up 
in  Australia  a  gold  nugget  weighing  twenty  three  pounds 
five  ounces.  That  was  enough  to  make  the  nugget  his,  as  the 
natural  recompense  or  wages  of  his  labor.  He  brought  its 
capacity  to  be  useful  within  the  reach  of  a  want,  and  thereby 
embodied  utility  in  it  by  his  labor.  All  natural  objects  hav- 
ing a  capacity  to  be  useful  when  brought  within  the  dominion 
of  a  want,  whether  by  great  or  little  labor,  acquire  a  utility 
or  use  value;  as,  trees  in  the  forest,  wild  fruit,  grass  on  the 
plains,  wild  cattle,  ore  in  the  mine,  &c.  Otherwise  a  man's 
breakfast  has  no  utility  until  he  eats  it;  his  clothes  no  utility 
until  he  puts  them  on:  and  his  drink  no  utility  until  he  pulls 
out  the  cork. 

It  thus  appears  to  be  the  fact,  that  originally  the  laborer 


WEALTH.  55 

acquired  his  title  to  the  raw  material  of  the  earth  and  all 
material  objects,  either  by  a  first  possession,  or  by  the  rob- 
bery or  theft  of  them  from  their  first  possessors,  or,  failing 
these,  then  by  purchase.  The  survivors  of  such  a  state  of 
things,  after  ages  of  cannibalism,  slavery,  and  all  kinds  of 
violence  and  misery,  gradually  adopted  certain  rules  whereby 
material  objects  became  lawful  acquisitions,  which  might  be 
possessed,  enjoyed  and  disposed  of  in  the  mode  prescribed. 
Things  became  private  property  and  their  ownership  a 
monopoly  in  the  hands  of  their  possessors  and  could  be  trans- 
ferred from  one  to  another  by  gift,  grant,  purchase  or  inheri- 
tance. As  to  things  without  an  owner  property  can  be  still 
acquired  in  them  by  finding  or  a  first  possession;  as,  in  hunt- 
ing, fishing,  &c.  For  the  sake  of  peace,  robbery  and  theft  are 
no  longer  allowed  as  between  private  persons;  it  is  piracy  on 
the  water  and  felony  on  land.  That  form  of  natural  wages 
is  now  only  tolerated  among  nations.  America  was  dis- 
covered by,  or  for,  the  Spaniards;  who  claimed  the  whole 
of  it  upon  that  ground  and  also  upon  a  grant  from  the  Pope. 
The  fact  that  the  Indians  had  previously  discovered  it,  was 
ignored.  The  title  of  the  Spaniards  to  the  parts  still  undis- 
covered, derived  from  the  Pope,  was  disputed  by  other  na- 
tions, although  not  heretics.  The  English  soverign  acquired 
a  title  by  discovery  deemed  good  as  against  other  nations,  to- 
a  large  part  of  North  America.  And  the  British  nation  has 
been  discovering  additional  territory  nearly  ever  since,  as, 
India,  Burmah,  Australia,  Egypt,  and  the  islands  of  the  sea. 
The  English,  French  and  Germans  have  lately  discovered 
nearly  the  whole  of  Africa. 

Assuming  the  title  of  the  United  States  to  its  territory  to 
be  good,  since  the  Indians  are  nearly  all  dead,  and  the  grant 
from  the  Pope  the  only  outstanding  title,  it  would  seem  that 
a  patent  for  a  quartei  section  of  land  to  an  individual,  either 
as  a  homestead  or  for  its  price  paid  in  money,  ought  to  confer 
upon  the  grantee  a  title  reasonably  good,  especially  as  against 
the  grantors. 

As  mankind  did  not  make  the  earth  nor  any  part  of  it,  no 
one  had  any  title  thereto,  originally,  except  through  a  prior 
possession.  Law,  when  established,  recognized  such  title, 
and  establishes  and  guards  the  bounds  of  private  property. 
When  its  owners  become  the  weaker  party  they  will  be  liable 


56  WEALTH. 

to  be  ousted  by  those  who  are  stronger.  In  Africa  the  sava- 
ges enslave  and  eat  one  another,  and  so  it  was  also,  in  the 
matter  of  diet  at  least,  among  the  aborigines  in  America. 
The  Spaniards  annihilated  some  races  by  subjecting  them  to 
a  cruel  slavery:  and  other  nations  were  kidnappers  and  slave 
dealers  more  or  less.  At  this  time  it  would  be  considered 
among  civilized  men  more  humane  to  merely  confiscate  a 
man's  property,  by  driving  him  off  or  killing  him,  than  by  re- 
ducing him  to  slavery  or  eating  him.  The  English  in  Africa 
are  wholly  opposed  to  slavery,  but  are  determined  to  have  the 
land  and  other  property. 

If  the  earth  belongs  to  all  men  alike,  or  to  the  stronger 
party  only,  then  if  one  attempts  to  seize  upon  his  share  and 
is  resisted  by  a  previous  possessor,  the  practice  is  to  kill  him. 
If  one  does  a  lawful  act  and  is  resisted,  it  becomes  a  case  of 
self  defense,  which  is  always  lawful.  If  this  is  not  so,  then 
it  is  not  clear  what  right  Europeans  have  in  Asia,  Africa,  or 
indeed  anywhere  out  of  Europe. 

If  a  laborer  acquired  a  useful  object  in  any  way,  his  posses- 
sion of  it  would  enable  him  to  exhaust  it  of  all  its  utilities, 
natural  or  acquired.  If  he  should  cut  down  the  finest  fruit  or 
other  tree  and  use  it  for  fuel,  or  to  make  his  tools  and  wea- 
pons, or  to  build  his  habitation,  he  would  exhaust  it  of  all  its 
utility;  so  also,  if  he  gathered  wild  fruit  and  ate  it.  And  if 
any  one  found  or  otherwise  acquired  gold,  silver,  copper,  or 
other  valuable  and  claimed  it  because  of  the  labor  exerted  in 
picking  it  up  and  rubbing  off  the  dirt,  or  other  labor  exerted 
in  acquiring  it,  there  would  be  no  difference  between  owning 
its  utilities  and  owning  the  thing  itself.  Therefore,  no  valid 
distinction  can  be  drawn,  upon  the  matter  of  title,  as  between 
natural  utilities  and  those  conferred  upon  an  object  by  labor. 
If  a  man  plucked  an  orange  and  squeezed  it,  all  its  natural 
and  acquired  utilities  would  come  out  together.  Therefore 
nothing  is  gained  in  favor  of  the  laborer,  as  to  title,  by  de- 
fining wealth  as  consisting  only  of  utilities  conferred  on  ma- 
terial objects  by  labor;  especially  as  the  amount  of  labor 
whether  great  or  small,  or  the  kind  of  labor,  whether  physi- 
cal or  mental,  or  both  combined,  cuts  no  figure  in  the  validity 
of  the  title  to  the  product.  If  one  laborer  sold  his  labor  to 
another  for  wages,  then  the  former  would  have  no  claim  what- 
ever upon  the  product. 


WEALTH.  57 

The  land  bolder  makes  the  land  his  natural  wages  by  the 
labor  of  occupying  and  holding  it,  and  his  claim  is  to  retain 
the  land  until  he  has  exhausted  it  of  its  utilities.  Any  laborer 
needs  not  only  one,  but  a  constant  supply  of  material  objects; 
as,  if  he  were  making  iron,  he  would  be  continually  in  want 
of  ore,  coal,  fluxes,  &c.  If  he  derived  them  directly  from 
their  places  of  deposit,  such  places  would  become  his,  as  his 
natural  wages,  by  means  of  the  labor  exerted  in  taking,  hold- 
ing and  working  them.  Every  laborer  can  only  acquire  ma- 
terial objects  by  a  first  possession,  or  by  robbing  the  possessor, 
or  by  purchase  from  him.  The  law  says  that  robbery  is  not 
now  allowable.  Both  labor  and  material  objects  are  now 
bought  and  sold. 

The  appropriation  of  land  and  the  accumulation  of  stock 
gave  rise  to  agreed  wages;  and  civilization  became  possible. 
The  state  of  anarchy  came  to  an  end.  What  has  been  the 
result?  "A  village  carpenter  employs  his  days  labor  in 
planing  boards  and  making  tables  and  drawers.  He  grum- 
bles at  his  lot.  He  dresses  himself  in  the  morning.  In  or- 
der to  put  at  his  disposal  his  simple  attire,  Americans  must 
have  produced  cotton;  Indians,  indigo;  Frenchmen,  wool  and 
flax;  Brazilians,  hides;  and  all  the  materials  must  have  been 
transported  to  various  towns  where  they  have  been  worked 
up,  spun,  woven,  dyed,  Ac.  Then  he  breakfasts.  In  order 
to  procure  him  bread,  land  must  be  cleared,  enclosed,  ma- 
nured, sown;  the  fruits  of  the  soil  must  have  been  preserved 
with  care  from  pillage,  and  security  must  have  reigned  among 
an  innumerable  multitude  of  people;  the  wheat  must  have 
been  cut  down,  ground  into  flour,  kneaded  and  prepared; 
iron,  steel,  wood,  stone  must  have  been  converted  into  instru- 
ments of  labor.  In  the  course  of  the  day  this  man  will  have 
occasion  to  use  sugar,  oil  and  various  materials  and  utensils. 
He  goes  out;  he  finds  the  streets  paved  and  lighted.  If  he 
takes  a  journey,  he  finds  that  other  men  have  removed  and 
levelled  the  soil,  filled  up  valleys,  hewed  down  mountains, 
bridged  rivers,  diminished  friction,  put  wheeled  carriages  on 
bars  of  iron  and  brought  the  power  of  animals  and  steam 
into  subjection  to  human  wants,  I  venture  to  say  that  in  a 
single  day  this  man  consumes  more  than  he  could  produce 
himself  in  ten  centuries"  (Bastiat,  Economic  Harmonies). 
Under  the  rule  of  order  and  law,  every  man  engaged  in  some 


58  WEALTH. 

lawful  calling  accordiDg  to  his  inclination  and  abilities  and 
working  solely  for  his  own  interest,  at  the  same  time  thereby 
best  promotes  the  interest  of  all  others.  Under  the  regime 
of  natural  wages,  the  entire  product  was  not  equal  to  that 
now  enjoyed  by  the  civilized  pauper.  Under  the  regime  of 
agreed  wages,  the  wage  laborer  can  buy  the  tool  he  works 
with  cheaper  than  he  could  make  it,  if  he  were  given  the 
materials,  and  fed  gratis;  the  blacksmith  can  buy  iron  and 
steel  cheaper  than  he  could  make  ihem  if  all  the  raw  materials 
were  dumped  down  ready  for  him  in  front  of  his  shop;  the 
tailor  can  buy  cloth  cheaper  than  he  could  make  it  if  he 
owned  the  sheep,  &c.  This  system,  which  is  the  result  of 
ages  of  practical  experience,  gives  property  and  wealth,  as  a 
reward,  to  the  wise,  industrious  and  frugal  man,  and  organi- 
zes society  in  the  interest  of  the  able  and  willing,  and  not 
of  the  unable  and  unwilling.  The  unable  being  regarded  as 
objects  of  charity,  and  the  unwilling  as  unworthy  of  any  re- 
ward. This  system  has  worked  well.  If  all  property  were 
now  confiscated  for  the  public  benefit  and  society  established 
upon  the  basis  of  a  universal  poor  house,  whether  such  a 
scheme  would  do  better  is  unknown,  for  it  has  not  yet  re- 
ceived a  trial.  The  drift  of  political  economy  is  in  its  favor. 
According  to  its  leading  author  (Mill),  the  practice  which  has 
been  always  followed  in  this  country,  of  putting  the  lands 
into  the  hands  of  the  people  in  fee  simple  and  in  severally  is 
the  height  of  injustice;  for  it  has  not  only  allowed  the  gift 
of  nature  to  be  engrossed  by  individuals  but  has  aided  and 
assisted  in  the  operation.  Whereas,  according  to  him,  every- 
body ought  to  be  tenants  of  the  State  on  short  leases,  or  mere 
tenants  at  will;  or  for  a  season  only  as  among  the  ancient 
Germans  or  other  barbarians,  or,  as  among  the  poor  and 
abject  Hindoos,  or  the  serfs  of  Russia.  And  some  of  his  fol- 
lowers and  imitators  would  have  all  grants  and  patents  of 
land  from  the  Government  nullified  by  a  tax  made  large 
enough  to  confiscate  the  land  thereby  granted  and  the  same 
"resumed  as  the  common  property  of  the  whole  people." 
And  all  the  poverty  caused  by  idleness,  extravagance,  drunk- 
enness, and  all  the  vices  is  charged  to  the  present  state  of 
society  in  which  private  property  exists  as  a  fact.  And  it  is 
taught,  as  science,  that  land  is  a  peculiar  and  odious  monop- 
oly. It  is  said  that  its  area  and  productiveness  are  limited; 


WEALTH. 


59 


that  after  a  certain  point  is  reached  its  product  will  not  in- 
crease in  proportion  to  the  labor  expended  upon  it,  for  other- 
wise, infinite  labor  would  produce  an  infinite  crop  and  a  few 
acres  would  be  enough  for  cultivation — the  remainder  might 
be  used  for  standing  room:  that  population  tends  to  increase 
continually  and  cause  an  increased  demand  for  subsistence 
and  thereby  increase  its  price,  and  to  cause  an  increased  sup- 
ply of  labor  and  thereby  decrease  its  price,  and  therefore, 
the  land  owner  by  means  of  his  monopoly  will  continually 
get  more  and  more  and  the  laborer  less  and  less.  The  price 
of  subsistence  and  labor,  being  fixed  by  the  relation  between 
the  supply  and  the  demand,  if  the  supply  of  subsistence 
is  limited  and  the  demand  for  it  liable  to  an  indefinite  increase, 
and  the  supply  of  labor  is  capable  of  an  unlimited  increase 
and  the  demand  for  it  is  limited,  subsistence  will  go  event- 
ually to  famine  prices  and  labor  to  nominal  ones.  Hence 
the  land  owner,  especially,  ought  to  be  wiped  out  and  the  net 
product  of  the  land  equally  enjoyed  by  all,  so  that  when  the 
world  becomes  over  populated,  the  whole  race  might  starve 
and  stink  out  all  together  and  at  the  same  time. 

The  above  condition  of  things  is  not  impending  just  now 
in  this  country.  For  in  January  1890  in  Chicago,  wages 
were  per  hour  for  common  labor,  $0.22;  carpenters,  $0.32|;  ma- 
sons $0.45  and  the  wholesale  prices  were  per  bushel,  wheat, 
$0.76f;  corn,  $0.29;  oats,  $0.20£,  &c;  and  the  wages  of  farm  la- 
borers in  the  country,  including  Nebraska,  $18.00  to  $20.00 
per  month,  with  board,  while  farm  products  were  on  the  basis 
of  $0.17  per  bushel  for  corn  in  Nebraska.  And  it  is  said  that 
according  to  the  Bureau  of  Labor  statistics  for  North  Caro- 
lina for  1888  the  average  price  of  lands  in  that  state  is  $6.50 
an  acre  while  the  best  farms  bring  less  than  $10,  that  229 
representative  farmers  reported  for  the  year  1887  an  actual 
loss  of  three  and  one  half  per  cent,  on  their  capital.  Also, 
that  according  to  the  report  of  the  Labor  Bureau  of  Connec- 
ticut for  1888,  693  representative  farms  after  deducting  the 
cost  of  hired  help,  feed,  fertilizers,  repairs,  insurance,  taxes 
and  interest  on  capital,  left  a  balance  of  $178,605  for  the 
remuneration  of  the  969  males  and  *i69  females  belonging  to 
the  families  of  the  proprietors  who  spent  their  whole  time  at 
work  upon  the  farm;  and  taking  no  account  of  the  women 
who  actually  do  a  large  share  of  the  work,  the  average  re- 


60  WEALTH. 

ward  of  the  969  farmers  for  their  work  of  supf  rintendence 
and  manual  labor  was  $184.31  for  the  year,  while  the  annual 
wages  of  the  average  hired  man  was  $386.36.  At  the  same 
time  the  average  wages  of  the  operatives  in  ninety  manufac- 
turing establishments  in  the  State  was  for  each  operative  $441 
per  year,  of  the  superintendents  and  overseers  $1.052,  and  of  an 
owner  $4.943.  In  Massachusetts  the  average  farmer  received 
as  his  reward  for  labor  and  superintendence  $326.49  and  the 
average  farm  laborer  or  hired  man  $345.  And  in  connection 
with  the  above  facts  the  question  is  asked:  "When  the 
average  farmer  of  New  England  receives  less  for  his  super- 
intendence and  manual  labor  combined,  than  the  average  mill 
hand,  and  less  even  than  his  own  hired  man,  is  it  strange 
that  he  offers  to  sell  his  farm  for  less  than  the  cost  of  the 
buildings,  and,  failing  that,  abandons  the  old  homestead." 

Man  has  been  on  earth  at  least  six  thousand  years  and  a 
large  part  of  it  is  still  a  wilderness,  such  as  the  valleys  of  the 
Amazon,  Orinoco,  La  Plata,  Congo,  <fcc.,  and  other  large  parts 
of  the  earth  are  very  thinly  peopled.  So  that,  in  fact,  the 
area  of  land  is  still  practically  unlimited  and  the  world  large 
enough  for  the  present  and  for  some  time  to  come.  Also,  in 
very  recent  times,  the  productiveness  of  land  has  been  greatly 
increased  and  the  powers  of  chemistry  still  remain  almost 
wholly  unknown.  Under  the  present  state  of  knowledge,  the 
earth  can  support  many  times  more  than  its  present  popula- 
tion. And  in  the  future,  it  may  be  possible  to  convert  the  for- 
ests, the  seams  of  coal  and  even  the  nitrogen  of  the  air 
directly  into  food;  and  even  now  certain  things  are  already 
known  which  lubricate  the  human  machinery,  arrest  waste 
and  render  less  food  necessary. 

But,  of  course,  if  population  increased  continually,  a  time 
would  finally  come,  when  the  numbers  would  be  so  great,  that, 
even  if  socialism,  land  confiscation,  or  some  other  scheme 
should  supply  enough  subsistance,  there  will  be  a  lack  of 
standing  room  and  a  deficiency  of  fresh  air  to  sustain  life. 

In  the  savage  State,  the  tendency  of  population  to  increase 
was  not  checked  by  the  limited  area  of  land  or  of  its  produc- 
tiveness, yet  there  were  checks  enough,  of  which  famine  was 
one.  Order  and  law,  knowledge  and  civilization  have  removed 
or  mitigated  many  of  them,  such  as  famine,  human  sacrifices, 
infanticide,  public  and  private  war  and  the  old  forms  of 


WEALTH.  61 

epidemics  and  plagues,  and  population  has  greatly  increased 
in  some  parts  of  the  world.  But  wealth  and  knowledge  bring 
in  other  checks;  the  stock  becomes  sterilized  and  also 
influences  moral  and  prudential  are  brought  to  bear  to  check 
the  increase.  The  original  American  stock,  once  so  prolific, 
is  now  believed  to  be  fading  out  and  Protestant  New  England 
promises  to  become  Catholic  in  time.  Even  under  the  very 
moderate  condition  or  state  of  wealth  and  knowledge  existing 
in  this  country  now,  a  large  amount  of  ignorance  and  poverty, 
and  therefore  fecundity,  is  annually  imported.  The  cities  and 
manufacturing  centers  are  said  to  be  also  continually  recruited 
from  a  stalwart  stock  of  men  raised  in  the  country,  and  there- 
fore, the  breeding  of  men  on  the  farm  ought  to  be  encouraged. 
Perhaps,  the  farmer  might  be  kept  poor,  and  therefore  suffi- 
ciently prolific,  by  taxing  his  land  away  from  him,  or  by  some 
mode  of  land  confiscation,  the  State  made  the  universal  land- 
lord and  the  cultivators  tenants  under  it  on  lease  or  at  will. 
Those  who  refuse  to  accept  of  half  a  mile  square  of  fertile 
land  as  a  gift,  and  prefer  to  crowd  into  the  cities  and  towns 
and  by  combination  and  intimidation  demand  and  insist  upon 
small  work  and  high  pay  will  soon  become  too  rich  and  in- 
tellectual to  have  large  families.  It  is  asserted  by  and  for 
them  that  the  land  belongs  to  all  men  alike;  hence  they  refuse 
to  take  their  share  out  in  the  wilderness.  If  the  site  of  a  city 
belongs  to  all  men  alike,  it  is  great  impudence  on  the  part  of 
its  present  possessors  to  require  others  to  accept  of  land  else- 
where, even  if  it  lay  in  the  suburbs.  Besides  an  offer  of  a 
homestead  in  the  west,  amounts  to  a  bribe  to  the  new  comers 
to  join  in  the  present  scheme  of  land  monopoly  and  thereby 
finally  exclude  the  future  immigrants. 

There  is  said  to  be  an  unearned  increment  in  land  which 
does  not  justly  belong  to  its  possessor.  This  as  to  farming 
lands  seems  to  be  chiefly  due  to  the  railroads  and  the  foreign 
consumers  of  farm  products.  The  charms  of  a  city  life  and 
the  benefits  derived  from  a  crowded  state  of  society  seem  to 
belong  to  the  class  of  unearned  increments.  If  those  who 
enjoy  them  would  forsake  the  city  and  retire  to  the  solitude 
of  the  country  they  would  probably  find  that  the  value  of 
land  at  a  great  commercial  center  was  not  due  to  their  pres- 
ence but  to  the  trade  and  business  of  the  world. 


<>2  WEALTH. 

The  argument  brought  against  the  land  owner  founded 
upon  the  small  size  of  the  earth  and  its  limited  productive- 
ness is  quite  premature  and  too  far  fetched  for  this  country, 
where  land  is  of  small  value  and  vast  regions  are  offered  to 
be  given  away  to  actual  settlers.  Land  here  is  merchandise. 
It  is  held  by  simple  forms  of  title  and  stands  substantially 
upon  the  same  footing  with  goods  and  chattels.  Everywhere 
land  is  for  sale,  and  throughout  the  public  domain  is  offered 
as  a  free  gift.  If  any  one  desires  to  share  in  any  increment 
or  profit  from  land,  let  him  save  a  part  of  his  earnings  and 
invest  them  in  real  estate,  or  go  west  and  take  up  a  home- 
stead. The  man  or  woman,  who  means  to  win,  saves  some- 
thing. Dr.  Franklin  saved  money  out  of  his  wages  while  at 
work  in  London  learning  the  printer's  trade.  The  Chinaman 
saves  money,  no  matter  how  small  his  wages.  There  is  spent 
annually  in  Chicago  in  smoke  and  drink  more  than  fifteen 
millions  of  dollars — a  large  part  of  it  by  the  wage  laborers. 
A  part  of  this  might  be  saved. 

In  this  country,  wealth  is  offered  as  the  reward  of  industry, 
frugality,  temperance  and  knowledge;  and,  barring  misfortune 
is  attainable  by  everyone  to  a  moderate  and  quite  sufficient 
extent  by  the  practice  of  even  a  part  of  the  cardinal  virtues. 
And  also  here,  any  man  can  be  his  own  landlord  and  master, 
if  he  chooses,  and  thus  earn  natural  wages,  i.  e.  the  entire 
product,  less  taxes. 

Mr.  Benton  (Thirty  Years,  &c.,Yol.  1,  Chap.  35)  in  a  speech 
in  the  United  States  Senate  in  favor  of  gifts  of  land  to  actual 
settlers  related  the  story  of  Granny  White.  At  the  age  of 
sixty,  she  had  been  left  a  widow  in  one  of  the  tide  water 
counties  of  North  Carolina.  Her  poverty  was  so  extreme 
that  when  she  went  to  the  County  Court  to  get  a  couple  of 
little  orphan  grand  children  bound  out  to  her,  the  Justice  re- 
fused to  let  her  have  them,  because  she  could  not  give  security 
to  keep  them  off  the  parish.  This  compelled  her  to  emigrate 
and  she  set  off  with  her  two  little  boys  upon  a  journey  of 
eight  or  nine  hundred  miles  to  what  was  then  called,  the 
Cumberland  Settlement.  And  there  this  aged  widow  with 
her  two  little  grand  children  of  eight  or  nine  years  old,  ad- 
vanced herself  to  comparative  wealth  by  her  industry  and 
raised  up  the  little  children  to  honor  and  independence. 


WEALTH.  63 

If  a  poor  old  widow  could  do  this,  no  man  need  sit  down 
and  whine.  Instead  of  crowding  into  the  city  and  posing  as 
an  object  of  charity,  and  demanding  in  the  name  of  ethical 
and  sentimental  political  economy  a  confiscation  of  land  and 
capital  on  his  behalf,  if  he  would  take  to  the  country  and  es- 
pecially go  west,  he  might  in  time  by  the  practice  of  industry 
and  frugality,  become  almost  as  much  of  a  man  as  Granny 
White. 

When  the  Pilgrims  first  landed  in  New  England  they  tried 
communism;  but  it  failed.  And  thereupon  a  certain  portion 
of  land  was  annually  alloted  to  each  house  holder  for  the  cul- 
tivation of  corn.  Then  the  community  began  to  thrive. 
The  authority  of  the  Governor  and  assistants  were  no  longer 
needed  to  enforce  industry;  and  those  who  had  previously 
professed  themselves  unable  to  work  now  toiled  zealously  for 
the  benefit  of  their  own  families.  Wives  were  no  longer 
compelled  to  act  as  public  servants  and  cook  and  wash  for 
any  members  of  the  community  the  government  might  ap- 
point. Yet  this  was  not  enough.  The  industrious  man  saw 
the  plot  of  ground  he  had  laboriously  cleared  and  manured 
pass  after  the  expiration  of  the  year  to  another,  it  might  be 
an  idle  and  improvident  neighbor.  Then  application  was 
made  to  the  Governor  for  permanent  holdings,  the  request 
was  granted  and  one  acre  was  alloted  in  several ty  to  every 
freeman.  (Doyle,  Puritan  Colonies.) 

Communism  taught  even  these  pious  and  industrious  peo- 
ple to  feign  sickness  and  become  idle  and  improvident.  They 
had  fled  from  their  homes  in  England  and  sought  for  liberty 
in  Holland.  They  faced  the  wilderness  and  its  hardships  in 
order  to  enjoy  liberty  on  English  soil.  And  when  each  one 
was  allowed  out  of  a  broad  continent  to  plant  his  foot  upon 
one  acre  of  land  as  his  own  soil  and  freehold,  the  American 
home  took  root  in  the  rocky  and  barren  soil,  and  the  Ameri- 
can system  of  land  ownership,  liberty,  and  free  government 
was  its  legitimate  consequence. 

The  plan  above  adopted  finally  became  the  general  practice 
and  has  been  continually  pursued.  And  now  vast  regions  still 
remain  to  be  given  away  in  tracts  of  half  a  mile  square  to 
every  man  who  wants  a  homestead.  And  on  forefathers  day, 
the  sons  of  the  pilgrims  by  descent  or  adoption,  get  together 
and  rejoice,  for  sundry  reasons,  and  among  others,  because 


t>4  WEALTH. 

they  consider  the  above  mentioned  one  acre  and  other  acres 
adjoining  and  thereto  annexed,  justly  belong  to  them,  to- 
gether with  all  the  increment  which  has  accuinmulated  there- 
on during  the  period  of  two  hundred  and  seventy  years. 

The  manhood  that  brought  the  pilgrim  to  his  home  here, 
enabled  him  in  due  time  to  stand  up  and  say,  I  am  the  State. 
And  all  the  coheirs  of  American  liberty  and  free  government 
worthy  of  the  name  subscribe  to  that  doctrine.  And  the 
question  is,  whether  a  man  is  fit  to  be  a  ruler,  who,  being  of 
good  health  and  sound  body,  feels  unable  or  unwilling  to 
take  care  of  himself  and  his  family  and  wants  to  rely  upon 
"  fraternity"  for  a  subsistence. 

If  any  one  acquires  property  lawfully,  he  thereby  acquires 
an  exclusive  command  or  possession  of  it:  ownership,  there- 
fore, is  a  monopoly.  A  man's  labor  in  a  free  country  is  his 
monopoly.  In  the  original  state  of  things,  (savagery)  he  be- 
came the  owner  of  the  entire  product,  whether  it  was  a  wig- 
wam, field,  tree,  or  any  other  material  object.  In  this  coun- 
try, if  a  man  works  for  himself  he  owns  the  entire  product;  if 
he  sells  his  labor  for  wages,  then  he  owns  his  wages.  His 
savings  are  his,  whether  invested  in  land,  or  any  other  property. 
If  a  man  has  no  property  or  monopoly  in  his  savings,  he  has 
none  in  his  wages.  If  a  man  has  any  property  he  can  either 
use  it  himself,  or  allow  another  to  use  it  for  a  consideration. 
If  it  is  capital  he  may  charge  lawful  interest;  if  land,  rent;  if 
labor,  wages.  Hence  it  fails  to  weaken  the  just  claim  to  call 
either  rent,  or  interest,  the  effect  of  monopoly,  or  the  price  of 
monopoly.  Wages  is  the  price  of  the  monopoly  which  a  man 
has  in  his  labor;  interest,  the  price  of  the  monopoly  which  he 
has  in  his  capital:  and  rent,  the  price  of  the  monopoly  which 
a  man  has  in  his  land. 

Land  on  the  plains  pays  no  rent  for  pasturage  because  it  is 
public  domain  and  open  to  all,  land  in  the  Cherokee  strip  pays 
rent  for  pasturage  because  of  the  Indian  title.  Land  which  is 
too  elevated,  dry,  or  rocky,  to  be  fit  for  cultivation  will  pro- 
duce pasturage  and  therefore  rent;  or  fruit  or  forest  trees, 
and,  therefore,  rent.  According  to  the  method  of  coppice 
growth,  the  wood  is  cut  off  at  stated  periods  and  a  new 
growth  allowed  to  spring  up  from  the  roots  and  stumps.  By 
another  method,  the  large  trees  are  cut  out  leaving  the 
smaller  ones  to  grow.  In  1876,  fifteen  acres  of  Scotch  fir 


WEALTH.  65 

timber,  eighty  years  old,  near  Perth,  Scotland,  sold  for  £132 
per  acre.  A  handsome  revenue  had  been  previously  obtained 
from  the  thinnings  (Hough,  Elements  of  Forestry).  Swamps 
will  raise  cranberries,  rice,  willows,  &c.  If  a  man  owned  the 
desert  of  Sahara,  the  rent  might  be  small  per  acre  or  per  square 
mile  without  irrigation. 

It  is  said  in  political  economy,  (Mill,  Book  2  Chap.  3.J 
"Private  property  being  assumed  as  a  fact,  we  have  next  to 
enumerate  the  different  classes  of  persons  to  whom  it  gives 
rise,  whose  concurrence,  or  at  least,  whose  permission  is  nec- 
essary to  production,  and  who  are,  therefore,  able  to  stipulate 
for  a  share  of  the  produce."  "  The  three  requisites  of  pro- 
duction are  labor,  capital  and  land;  understanding  by  capital 
the  means  and  appliances  which  are  the  result  of  previous 
labor;  and  by  land,  the  materials  and  instruments  supplied 
by  nature.  Since  each  of  these  elements  may  be  separately 
appropriated  the  industrial  community  may  be  considered  as 
divided  into  land  owners,  capitalists  and  productive  laborers. 
Each  of  these  classes,  as  such,  obtains  a  share  of  the  produce, 
no  other  person  or  class  obtains  anything  except  by  conces- 
sion from  them.  The  remainder  of  the  community  is,  in  fact 
supported  at  their  expense,  giving,  if  any  equivalent  one  con- 
sisting of  unproductive  services.  These  three  classes,  there- 
fore, are  considered  in  political  economy  as  making  up  the 
whole  community." 

If  private  property  were  not  a  fact,  the  land  owners  and 
capitalists  would  be  wiped  out  and  the  above  three  classes 
would  be  reduced  to  one.  If,  however,  the  productive  laborers 
had  property  in  their  earnings,  some  might  and  probably 
would  save  a  part  of  their  shares  of  production;  and  thus  the 
capitalists  would  reappear.  In  order  to  prevent  this,  such  a 
scheme  requires  that  nothing  should  be  divided  except  con- 
sumable and  perishable  commodities.  Also  all  loans  made 
should  bear  no  interest.  And  so  it  is  in  socialism. 

If  the  earth  belonged  to  all  men  alike,  and  not  to  the  pro- 
ductive laborers  only,  it  would  seem  to  follow  that  every  one 
ought  to  receive  something  whether  he  worked  or  not,  viz.,  a 
share  of  all  spontaneous  products  or  pure  gifts  of  nature,  such 
as  clams,  oysters,  fish,  game,  eggs,  herbs,  grass,  fallen  timber, 
<fec.  But  if  wealth  is  the  sole  product  of  labor,  then  the 
earth  furnishes  no  usufruct  or  profit  in  excess  of  the  just 


66  WEALTH. 

wages  of  labor,  and  therefore  no  one  is  entitled  to  anything 
unless  he  is  a  productive  laborer.  Who  then  are  the  produc- 
tive laborers? 

One  great  authority  (Adam  Smith,  Book  2,  Chap.  3) 
excludes  from  the  ranks  of  productive  labor  all  officers  of  the 
government,  all  churchmen,  lawyers,  physicians,  nurses, 
teachers,  men  of  letters,  menial  servants,  musicians,  players 
and  buffoons.  They  are  said  to  be  tax  eaters,  tithe  eaters  and 
feeders  off  of  revenue.  All  such  persons,  therefore,  fall  into 
the  class  who  are  supported  at  the  expense  of  the  productive 
laborers,  "giving,  if  any  equivalent,  one  consisting  of  unpro- 
ductive services."  But  the  other  great  authority,  (Mill,  Book 
1,  Chap.  3)  has  essentially  modified  this;  for  he  says,  "I  shall 
not  refuse  the  appellation  productive  to  labor  which  yields  no 
material  product  as  its  direct  result,  provided,  that  an 
increase  of  material  products  is  its  ultimate  consequence." 
This  lets  down  the  bars  and  admits  everybody.  It  lets  in  the 
woman  who  cooks  the  victuals  of  a  productive  laborer  and 
mends  his  clothes;  those  who  nurse  and  heal  him  when  sick, 
or  make  him  healthy  and  strong,  wiser  and  more  skillful, 
more  industrious  and  efficient,  more  honest  and  lawabiding, 
and  more  cheerful  and  happy.  Even  the  buffoons  might  get 
in  under  this  proviso.  Still  its  author  has  cast  a  doubt  over 
its  application  by  saying  that,  saving  souls  is  not  productive 
labor,  nor  saving  a  man's  life  unless  he  is  a  productive  laborer 
and  produces  more  than  he  consumes.  Perhaps  he  would 
have  allowed  that  the  act  of  procreation  is  productive  labor, 
if  the  result  as  its  ultimate  consequence  was  a  productive 
laborer  who  produced  more  than  he  consumed.  All  labor 
which  is  socially  necessary  mus-t  be  productive,  when  socially 
considered. 

It  is  laid  down  by  the  authority  last  quoted  that  labor  is 
not  productive  unless  it  produces  an  increase  of  material  pro- 
ducts directly  or  remotely.  Hence  if  by  labor  and  sacrifice 
a  less  amount  of  utility  was  produced  than  consumed,  such 
labor  is  not  productive,  and  is  entitled  to  nothing  in  distri- 
bution. And  for  a  stronger  reason,  all  labor  no  matter  how 
great,  which  ends  in  failure,  or  produces  nothing  of  value,  is 
not  productive  labor  and  therefore  entitled  to  nothing.  But 
this  is  measuring  labor  by  utility,  instead  of  the  latter  by  the 
former.  In  any  fair  system  of  distribution,  the  things  to  be 


WEALTH.  6T 

distributed,  the  persons  entitled,  and  the  respective  shares  of 
each  ought  to  be  accurately  ascertained.  Unless  wealth  is 
correctly  defined  the  subject  of  distribution  remains  uncer- 
tain. And  if  correctly  defined  shall  it  be  measured  by  a  unit 
of  toil  and  trouble,  or  a  unit  of  utility? 

Instead  of  considering  the  subject  from  a  socialistic  point 
of  view  and  regarding  wealth  as  produced,  collected  and 
warehoused,  and  awaiting  distribution,  the  matter  might  be 
looked  at  from  the  individual  standpoint.  From  this  point 
of  view  the  total  wealth  is  the  sum  of  the  wealth  of  the  in- 
dividual members  of  the  community,  and  distribution  is  made 
to  everyone  who  pursues  a  lawful  calling  and  obtains  a 
reward  therefor,  whether  he  makes  or  cobbles  a  shoe,  cures 
the  jumping  toothache,  sets  a  broken  bone,  heals  the  sick,  or 
saves  souls.  And  every  one  who  pursues  his  own  personal  in- 
terest in  a  lawful  manner  is  productively  employed  both 
individually  and  socially,  if  he  earns  a  reward.  In  this  way 
wealth  is  naturally  distributed,  or  tends  so  to  be,  among  those 
entitled  according  to  their  several  gifts  and  merits.  Experi- 
ence has  caused  mankind  to  adopt  this  method  of  distribution 
and  while  it  may  operate  to  some  extent  unequally  and  the 
lame  and  the  lazy  may  get  left  out  altogether,  yet  this  is  an 
imperfect  world  in  which  the  tendency  is  for  the  early  bird  to 
get  the  worm. 

Even  if  it  were  desirable  to  confiscate  the  land  and  capital, 
one  or  both,  yet  it  cannot  be  done  in  this  country  now, 
because  the  property  owners  are  in  the  majority.  Until 
recently  the  community  consisted  chiefly  of  those  who 
combined  the  three  classes  into  one.  They  owned  the  land 
and  capital  and  performed  the  chief  part  of  the  labor 
themselves,  physical  and  mental.  The  professional  wage 
laborers  as  a  numerous  and  powerful  class  are  comparatively 
newcomers.  If  a  person  owns  both  land  and  capital  and 
performs  all  the  labor  himself,  are  any  others  entitled  to 
share  in  the  proceeds?  If  he  hired  another  person  to  work 
for  him,  ought  the  latter  to  have  more  than  his  wages?  If  the 
industrial  community  be  divided  into  two  classes,  viz.,  those 
who  work  for  themselves,  and  those  who  work  for  hire,  then 
the  thing  to  prove  is  that  the  latter  are  entitled  to  the  entire 
product.  All  labor  is  not  manual  labor;  nor  is  all  productive 
labor,  hired  labor. 


68  WEALTH. 

Since  the  wage  laborers  are  in  a  minority  and  therefore 
cannot  at  this  time  confiscate  the  land  and  capital  directly, 
the  same  result  is  attempted  to  be  brought  about  indirectly, 
by  means  of  labor  unions  backed  by  intimidation  and  force. 
Their  point  is  gained  if  they  can  make  the  legal  owners  of 
the  land  and  capital  merely  trustees  holding  for  their  benefit. 
The  farmers  still  own  their  own  farms  and  cultivate  them 
chiefly  by  their  own  labor;  consequently  it  is  not  easy  to 
reach  them.  But  in  the  other  industries  the  wage  laborers 
by  unions  and  the  capitalists  by  syndicates,  concur  in  raising 
the  price  of  their  products  as  against  the  farmer.  As  the 
wage  laborer  treads  upon  the  toes  of  the  manufacturer  he 
cries  out  for  more  tariff  legisation.  In  order  to  get  even,  the 
Farmers'  Alliance  ought  to  adopt  into  their  platform  the 
eight  hour  day,  and  the  prohibition  of  the  importation  from 
abroad  of  all  subsistence.  If  this  is  not  done,  then  some  of 
the  farmers  in  the  piney  woods  of  North  Carolina  and  on  the 
barren  and  rocky  soil  of  New  England  ought  to  seek  other 
employment,  or  else  change  places  with  the  hired  man. 

If  the  officers  of  the  government  are  merely  tax  eaters, 
then  their  numbers  ought  to  be  reduced  to  a  minimum,  and 
not  allowed  to  multiply  like  maggots  in  an  old  cheese.  Ac- 
cording to  this  idea  government  is  an  incubus  and  at  best,  merely 
a  necessary  evil.  In  taxation  the  most  important  question 
would  be,  whether  all  the  taxes  levied,  or  proposed  so  to  be, 
were  necessary:  the  question  who  should  pay  them  would  be 
a  secondary  matter.  Contra,  however,  if  the  people  can  be 
taxed  rich,  and  the  community  also  benefited  by  distributing 
the  money  in  pensions  or  dividing  it  among  the  States  so  as  to 
give  their  legislatures  a  whack  at  it. 

Still  the  army  and  navy  might  claim  to  be  productive 
laborers,  because  they  spent  their  time  and  risked  their  lives 
in  keeping  off  other  nations  who  might  rediscover  this 
country  and  claim  it  under  the  pretence  that  the  earth  be- 
longed to  all  men  alike  and  that  its  present  occupants  had 
possessed  and  enjoyed  it  as  their  own  quite  long  enough. 
And  the  executive  and  judiciary  might  assert  that  they 
enabled  the  productive  laborer  to  enjoy  in  peace  and  security 
such  utilities  as  were  lawful  acquisitions  on  his  part  and  that 
ownership  in  security  was  an  essential  element  in  wealth. 
And  the  legislators  might  insist  that  in  legislation  they  had 


WEALTH.  69 

a  panacea  for  all  hard  times,  poverty,  and  all  the  ills  which 
continually  afflict  the  body  politic.  And  in  proof  of  their 
claim  they  might  point  to  the  fact  that  they  had  benefited  the 
manufacturer,  ex-soldier,  &c.,  by  taxing  the  consumer,  and 
could  enrich  the  farmer  by  making  the  dollar  smaller. 

If  the  business  of  production  were  conducted  after  the 
manner  of  running  a  mill,  into  which  material  objects  (raw 
material)  were  dumped  by  labor  as  into  a  hopper  at  one  end 
and  the  "  utilities  embodied  <fcc."  tumbled  out  at  the  other, 
then  the  productive  laborers  would  be  well  fixed,  provided  they 
owned  the  means  and  machinery  of  production  and  knew  how 
to  run  the  mill. 

•  If  utilities  consisted  merely  of  capacities  to  be  useful  and 
did  not  depend  at  all  upon  the  varying  and  capricious  wants 
of  the  consumers,  then  production  might  assume  the  form  of 
routine  work  and  any  one  might  soon  learn  enough  to  feed 
the  mill.  If  people  dressed  in  feathers,  greasy  paint,  and 
moccasins,  or  even  in  skins,  or  homespun  and  wooden  shoes, 
the  machinery  of  production  would  not  be  very  complicated. 
But  the  fact  is,  that  in  a  civilized  state  of  society,  the  case  is 
entirely  different.  It  is  not  every  "  productive  laborer"  who 
can  build  "  the  machinery  of  production"  or  even  run  it  un- 
less instructed.  And  it  is  also  necessary  to  know  what  utili- 
ties to  embody  and  how  to  do  it.  All  this  requires  knowledge 
and  skill  and  business  capacity.  And  since  these  may  be 
furnished  by  one  man  or  set  of  men  and  the  labor  by  another 
or  others,  they  are  to  be  separately  considered.  And  this 
gives  rise  to  another  and  important  class,  to-wit,  the  em- 
ployers; who  are  not  to  be  confounded  with  and  put  into  the 
class  of  productive  laborers  at  present,  and  not  at  all,  until 
the  employees  reach  the  point  of  employing  their  employers. 

It  was  said  by  an  acute  writer  (Jevons)  "  Economics  must 
be  founded  upon  a  full  and  accurate  investigation  of  the  con- 
ditions of  utility,  and  to  understand  this  element  we  must 
necessarily  examine  the  wants  and  desires  of  men.  We, 
first  of  all,  need  a  theory  of  the  consumption  of  wealth.  J. 
S.  Mill,  indeed,  has  given  an  opinion  inconsistent  with  this." 
"But  it  is  surely  obvious  that  economics  does  rest  upon  the 
laws  of  human  enjoyment.  We  labor  to  produce  with  the 
sole  object  of  consuming,  and  the  kind  and  amount  of  goods 
produced  must  be  determined  with  regard  to  what  we  want 


70  WEALTH. 

to  consume.  Every  manufacturer  knows  and  feels  how  close- 
ly he  must  anticipate  the  tastes  and  wants  of  his  customers; 
his  whole  success  depends  upon  it."  It  is  not  for  the  pro- 
ducer to  dictate  the  nature  and  style  of  the  product  to  the 
consumer.  A  Canadian  tried  to  induce  an  English  manufac- 
turer to  make  an  axe  in  a  certain  way:  the  only  answer  was 
an  axe  made  according  to  the  ideas  of  the  maker  with  a  reply 
that,  that  was  the  way  to  make  an  axe  (Yeats.)  The 
Mexicans  say  that  the  lack  of  trade  with  them  on  the  part  of 
the  United  States  is  owing  to  the  failure  to  supply  them  with 
the  articles  they  desire  or  require.  And  the  late  ex-Governor 
English  of  Connecticut  is  authority  for  the  statement  that 
the  English  and  Germans  monopolized  the  trade  on  the  Rio 
Grande  of  certain  cotton  goods  which  were  sold  to  the  Mexi- 
cans by  the  bolt.  The  Americans  put  too  many  yards  of  cloth 
in  a  bolt  to  be  able  to  compete;  they  were  powerless  to  dic- 
tate to  the  Mexicans  as  to  how  many  yards  of  cloth  ought  to 
be  put  into  a  bolt.  A  certain  person  desiring  an  ornamental 
clock  for  his  parlor  mantel  and  being  disposed  to  favor  home 
industry  applied  at  the  store  of  the  Seth  Thomas  Clock  Com- 
pany. He  objected  to  tjie  clocks  shown  to  him  as  having  no 
beauty  of  design,  whereupon  the  seller  in  a  rage  took  down 
an  ordinary  clock  quite  suitable  for  a  kitchen  or  barn  and 
shoved  it  at  the^  customer,  saying  here  is  what  you  want,  do 
you  think  that  you  can  teach  people  who  have  been  fifty 
years  making  clocks  how  to  make  a  clock?  The  result  was 
the  buyer  bought  elsewhere.  A  baker  might  starve  people 
into  buying  rye  bread,  if  he  could  prevent  them  from  getting 
other  kinds;  otherwise,  he  would  be  compelled  to  comply  with 
the  tastes  and  wants  of  his  customers,  or  quit  the  business. 

It  is  knowledge  which  preconceives  the  utility  and  points 
out  the  way  to  embody  it.  Mere  labor  or  toil  and  trouble  is 
not  adequate  to  the  purpose.  The  wealth  of  the  savage  is  on 
£  7evel  with  his  knowledge.  As  man  acquires  the  latter,  his 
wants  multiply  and  also  the  means  to  satisfy  them.  If  a  race 
of  savages  knew  of  the  existence  of  iron  and  its  uses,  genera- 
tions of  them  might  exhaust  all  their  resources  of  land,  labor, 
and  capital  in  order  to  produce  iron;  but  in  vain,  until  some 
one  taught  them  the  process.  Afterwards,  another  might 
teach  them  how  to  convert  the  iron  into  steel;  but  ages  might 
intervene  before  a  Bessemer  would  show  how  steel  could  be 


WEALTH.  71 

made  by  wholesale.  It  was  said,  or  fabled,  that  the  man  who 
first  taught  the  use  of  fire  was  worshipped  as  a  demigod;  but 
thereafter,  a  long  period  elapsed  before  the  lightning  was 
made  to  weld  iron,  furnish  light,  carry  messages,  draw  the 
street  car,  &c. 

The  author  of  Utopia,  lived  about  three  hundred  and  fifty 
years  ago.  Then  England  supported  about  two  millions  of 
people.  The  plague  was  always  present  in  London  and  dur- 
ing every  generation  broke  out  and  killed  off  a  large  part  of 
the  population.  Sir  Thomas  More  lived  in  days  of  compara- 
tive ignorance  and  squalor.  The  plague  and  sweating  sick- 
ness were  attributed  by  Erasmus  to  the  clay  floors  of  the 
houses  which  were  strewed  with  rushes  under  which  lay  a 
purtrid  mixture  of  beer,  stinking  fragments  of  food,  and  all 
sorts  of  nastiness.  According  to  the  state  of  knowledge  then 
existing,  it  was  the  opinion  of  Sir  Thomas  More,  as  expressed 
in  his  Utopia,  that  if  all  the  land  and  capital  were  owned  in 
common  and  everybody  worked  nine  hours  a  day,  they  could 
all  have  plenty  to  eat,  and  could  have  a  woolen  cloak  to 
throw  over  their  ordinary  apparel  of  skins  and  hides,  when 
they  went  abroad  or  saw  company.  And  yet  this  was  afflu- 
ence as  compared  with  what  labor  could  do,  if  it  had  not  a 
master  and  instructor.  Without  knowledge,  it  was  always 
upon  the  verge  of  starvation  when  the  world  was  occupied 
by  only  a  few  people. 

In  Utopia  every  man  worked  from  6  A.  M.  until  noon,  and 
after  resting  two  hours  then  worked  from  2  p.  M.  until  5 
o'clock.  "  Now,  sir,  in  their  apparel,  mark  (I  pray  you)  how 
few  workmen  they  need,  first  of  all,  being  at  work  they  be 
covered  homely  with  leather  or  skins  that -will  last  seven 
years;  when  they  go  forth  abroad  they  cast  upon  them  a 
cloak  which  hideth  the  other  homely  apparel."  Everyone 
worked  under  the  eye  of  a  master,  and  no  one  could  go  out 
of  his  precinct  or  bounds  without  a  pass,  under  penalty  of 
slavery  for  the  second  offense;  nor  could  he  walk  abroad 
within  his  bounds  without  the  consent  of  his  father  and  his 
wife.  "Now  you  see  how  little  liberty  they  have  to  loiter; 
how  they  have  no  cloak  or  pretence  for  idleness.  For  there 
be  neither  wine  taverns,  nor  stews,  nor  any  occasion  of  vice 
or  wickedness;  no  lurking  corners;  no  places  of  wicked 
counsels  or  unlawful  assemblies;  but  they  be  in  the  present 


72  WEALTH. 

sight  and  under  the  eyes  of  every  man."  And  although  their 
cities  were  dull,  the  country  was  duller,  and  therefore,  they 
were  drafted  out  of  the  city  to  work  at  farming  in  the  country 
at  that  hard  and  sharp  kind  of  life  for  two  years,  every  man 
in  his  turn. 

Since  the  time  of  Sir  Thomas  More,  knowledge  has  im- 
proved agriculture;  the  average  crop  has  been  great1}'  in- 
creased and  the  necessary  labor  much  reduced.  Rotation  of 
crops  has  abolished  fallow,  and  the  farmer  may  raise  root 
crops  instead  of  weeds;  something  has  been  learned  also 
about  manures  and  fertilizers.  Agricultural  chemistry,  al- 
though in  its  infancy,  teaches  much;  of  which,  however,  the 
average  farmer  knows  but  little.  Also  farming  tools  have 
been  greatly  improved;  and  some  knowledge  of  machinery 
has  become  necessary  even  to  the  farmer:  for  now— on  the 
right  kind  of  land — he  that  by  the  plough  would  thrive,  may, 
if  he  likes,  both  ride  and  drive.  And  now  instead  of  using  a 
clam  shell  for  a  hoe,  or  even  the  sickle  and  the  flail,  he  can 
run  a  reaper,  or  a  header  and  thresher.  Thomas  Jefferson, 
in  his  day,  strove  in  vain  to  induce  the  southern  planter  to 
cultivate  the  olive;  and  by  a  little  wisdom  America  might  in 
time  become  the  land  of  the  vine,  and  made  not  only  a  land 
flowing  with  milk  and  honey,  but  also  oil  and  wine  and  all 
kinds  of  abundance.  In  manufacturing,  knowledge  and 
skill  have  made  the  labor  of  one  man  assisted  by  machinery 
equal  to  that  of  a  hundred  or  hundreds  laboring  without  it. 
And  if  a  tariff  operates  as  a  school  of  knowledge,  which  can- 
not be  taught  cheaper,  then  pile  it  up  mountain  high,  if 
necessary.  In  farming  it  may  be  true  that  any  dunce  can 
wear  out  a  rich,  and  virgin  soil  by  raising  cotton  and  tobacco 
at  the  South:  and  hogs,  hominey,  and  whisky  at  the  North. 
But  to  embody  utilities  with  machinery  in  large  quantities 
and  at  low  prices  requires  knowledge  and  skill,  at  least,  in 
the  manufacturing  industries. 

If  knowledge  and  skill  as  well  as  physical  power  are  be- 
hind the  simplest  tool  its  efficiency  is  greatly  increased.  And 
progress  involves  the  handling  of  complicated  tools,  instru- 
ments and  machinery;  also,  of  subtle  and  powerful  agents, 
such  as  light,  heat,  electricity,  and  chemical  affinities. 
Ignorant  labor  is  unfit  to  deal  with  electric  wires,  dynamos, 
steam  engines,  &c.  Schools  of  industry  are  needed,  so  or- 


WEALTH. 


ganized  as  to  keep  up  with  the  progress  of  science  and  inven- 
tion. The  youth  ought  to  be  taught  knowledge,  skill  and 
dexterity  by  competent  masters  so  that  their  labor  will  be 
educated  and  skilled  labor.  The  practical  arts  and  their 
kindred  sciences  ought  to  be  taught  by  trained  and  compe- 
tent men.  To  know  some  of  these  is  not  inconsistent  with  a 
liberal  education.  And  instead  of  a  limitation  of  appren- 
tices, every  boy,  no  matter  how  poor  or  worthless  his  father 
may  be,  ought  to  have  a  show,  and  learn  how  to  live.  Then 
he  would  not  be  compelled  to  wander  about  seeking  an  em- 
ployer to  tell  him  what  to  do.  It  is  a  wonder,  how  the  need 
for  bosses  and  employers  of  other  men  is  supplied.  They 
are  often  called,  self  made  men,  because  they  seem  to  produce 
themselves  without  assistance  and  at  their  own  expense.  All 
the  schools  of  industry  which  could  be  started  would  be- 
cheap,  if  in  a  generation  they  would  produce  a  Bessemer,  Sie- 
mens, or  Edison.  It  is  hardly  fair  to  allow  him  to  start  as  a 
newsboy  and  graduate  himself  out  of  a  railroad  car. 

An  obituary  notice  in  a  newspaper  of  Sept.  13th,  1890  is  as 
follows: 

ALBANY,  N.  Y.,  Sept.  12.— [Special.] — Robert  Johnston 
died  at  his  home  in  Cohoes  this  morning. 

[He  had  been  connected  with  the  cotton  industry  for 
seventy-six  years.  He  was  born  in  Dalston,  England,  near 
the  Scottish  border,  Feb.  2,  1807,  commencing  work  as  a  bob- 
bin boy  in  Dixon's  cotton  mill,  Warwick  Bridge,  Northum- 
berland, England,  when  he  was  only  seven  years  of  age. 
The  wages  paid  to  bobbin  boys  at  that  time  was  sixpence  a 
week.  In  1830  Mr.  Johnston  came  to  America  and  hired  out 
as  a  spinner  in  a  mill  in  Providence,  R.  I.  He  did  all  the 
spinning  for  the  mill  on  a  pair  of  hand  mules.  In  1834  Mr. 
Johnston  went  to  Valaties,  N.  Y.,  and  took  charge  of  a  cot- 
ton-mill. While  there  he  produced  the  first  muslin  delaine 
ever  made  in  this  country.  The  warp  was  spun  in  Valaties 
and  the  filling  was  imported  from  England.  In  1850  he  ac- 
cepted the  management  of  the  Harmony  Mill,  and  from  that 
date  the  cotton  industry  in  Cohoes  has  been  a  success.  Since 
Mr.  Johnston's  management,  which  continued  up  to  the  time 
of  his  death,  the  concern  has  grown  and  developed  until  it  is 
now  one  of  the  largest  cotton  plants  in  the  world.  The  com- 
pany operates  between  6,000  and  7,000  looms,  and  makes 


74  WEALTH. 

over  80,000,000  yards  of  cloth  per  annum.  Four  thousand 
hands  are  employed.] 

The  carpenters  of  Chicago  struck  for  forty  cents  an  hourr 
an  eight  hour  day,  the  limitation  of  apprentices,  the  recogni- 
tion of  their  union  and  the  discharge  of  all  non  union  men- 
This  strike  implied  that  among  so  many  thousand  men  com- 
bined together  in  a  union  for  their  common  benefit,  there  was 
not  the  necessary  knowledge  and  skill  to  enable  them  to  bid 
upon  jobs  and  execute  them,  themselves.  If  they  had  had 
the  capacity  to  execute  the  work  alone,  they  could  have  dis- 
missed their  employers  and  obtained  the  whole  profit.  But 
union  and  co-operation  fail  in  the  absence  of  the  requisite 
ability.  By  their  strike,  these  carpenters  admitted  that  their 
proper  position  was  to  be  hired  men,  and  that  they  were  in- 
competent to  be  their  own  employers. 

Education  may  be  no  cure  for  stupidity,  but  it  is  for  igno- 
rance. And  any  man  ought  to  blush  who  would  combine  with 
others  to  promote  ignorance.  Instead  of  a  limitation  of 
apprentices,  every  boy  ought  to  have  a  chance  to  become  the 
employer  of  such  men.  He  ought  to  be  taught  how  to  em- 
body utilities  of  some  kind  or  other.  There  ought  to  be  no 
premium  put  upon  ignorance,  at  least  in  this  country.  The 
employers  replied  to  the  striking  carpenters,  among  other 
things,  that  there  was  a  great  difference  in  the  abilities  of 
men  working  at  carpentry  and  therefore  a  uniform  rate  of 
wages  was  out  of  the  question.  In  the  time  of  the  handi- 
crafts, the  guilds  required  every  man  to  serve  an  apprentice- 
ship and  otherwise  qualify  himself  as  a  master  of  his  trade 
before  he  could  practice  it.  Then,  it  was  not  enough  to  make 
a  man  a  carpenter  or  a  mason  for  him  to  join  a  union  and 
swing  a  broad  axe  or  whack  a  brick  or  stone  with  a  trowel 
and  call  himself  a  mechanic.  Such  men  demand  that  no  skill- 
ful man  shall  "best1"  anybody,  and  that  all  shall  be  paid 
alike. 

As  to  mere  labor  its  value  cannot  be  measured  by  any  unit 
of  time  or  of  toil  and  trouble.  If  a  small  amount  of  utility 
is  embodied  by  it,  its  reward  must  be  small,  although  the  toil 
and  trouble,  time  and  sacrifice  may  be  great.  If  labor  dupli- 
cated the  tower  of  Babel  it  won  d  not  be  entitled  to  pay  in 
proportion  to  the  sacrifice.  Labor  ought  not  to  claim  more 
than  its  entire  product.  And  in  the  original  state  of  things  it 


WEALTH.  75 

was  very  liable  to  starve  upon  such  wages.  But  when  labor 
fell  under  the  direction  of  knowledge  and  skill  a  change  took 
place  which  converted  savagery  into  civilization  and  poverty 
and  starvation  into  wealth  and  abundance.  Knowledge  has 
stripped  off  from  the  common  laborer  the  skins  of  animals  and 
clothed  him  in  decency  and  comfort.  Knowledge  and  skill 
enables  a  diamond  cutter  in  Amsterdam  to  earn  live  dollars  a 
day,  when  a  common  laborer  only  obtains  twenty-five  cents. 
And  the  man  who  can  point  out  what  utilities  to  embody  and 
how  to  do  it  gets  large  pay,  although  he  may  sit  in  the  shade, 
and  see  that  common  labor  performs  its  alloted  task. 

Although  mere  labor  could  not  support  and  perpetuate  itself 
after  population  had  at  all  multiplied,  yet  on  economic 
grounds,  the  share  allowed  to  it  in  distribution  ought  to  be 
enough  to  keep  the  human  machine  up  to  its  maximum  effi- 
ciency and  pay  for  its  reproduction.  If  it  gets  any  more,  it 
is  because  of  competition  among  employers,  or  of  a  corner  in 
the  labor  market  brought  about  by  strikes. 

And  there  is,  no  doubt,  a  period  of  daily  toil,  varying  with 
the  occupation,  during  which  the  human  mechanism  would 
on  the  average  exert  its  maximum  of  energy.  If  this  were 
ascertained  to  be  eight  hours  per  day,  then,  an  employer 
ought  to  pay  more  for  an  eight  hour  day  than  for  one  of  ten. 
And  also,  it  would  be  against  public  policy  to  permit  the 
wage  laborer  to  injure  himself  by  over  work,  since  it  produces- 
nervous  and  physical  exhaustion,  which  causes  him  to  seek 
relief  in  smoke  and  drink  and  other  vices.  Although  a  cer- 
tain amount  of  exercise  is  just  as  necessary  to  keep  the  mind 
and  body  in  a  healthy  state  as  food,  clothing  and  shelter,  no 
deduction  from  the  proper  wages  of  labor  could  be  made  on 
that  account,  because  the  amount  allowed  as  above  is  all  re- 
quired to  keep  the  laborer  up  to  the  mark. 

In  any  system  of  production  suited  to  the  wants  of  civilized 
men,  whatever  may  be  a  fair  rate  of  wages  for  labor,  con- 
sidered by  itself  and  as  duly  separated  from  the  possession  of 
knowledge  and  skill,  it  is  quite  evident  that  mere  labor  is  not 
the  sole  author  of  the  product  and  the  wage  laborer  not  entitled 
to  it  all.  The  men  who  need  employers  to  tell  them  what  to 
do  are  not  the  sole  authors  of  all  wealth. 


AMERICAN    MONEY.  77 


AMERICAN    MONEY. 

I. 

THE  STANDARD. 

Wealth  is  measured  by  money  and  in  terms  of  the  money 
unit.  If  such  unit  be  called  a  dollar,  whatever  represents  it 
in  circulation,  as  for  instance  a  certain  quantity  by  weight  of 
gold  or  silver,  is  the  standard  unit  of  common  measure  of 
wealth,  and  its  value  the  unit  of  wealth  value.  If  a  horse 
were  worth  one  hundred  such  dollars;  then  the  horse,  as  wealth, 
is  one  hundred  times  more  than  one  dollar;  or,  its  value  is  one 
hundred  times  greater  than  the  value  of  one  dollar.  If  a  debt 
calls  for  the  payment  of  one  hundred  dollars  its  value  is  rated 
in  terms  of  the  value  of  one  dollar.  And  if  before  payment 
the  value  of  the  dollar  is  altered  artificially  by  either  debasing 
or  enhancing  it,  a  wrong  is  done  to  one  of  the  parties.  Any 
unit  of  common  measure  may  expand  or  contract,  or  otherwise 
alter  from  natural  causes;  but  any  artificial  alteration  has  al- 
ways been  considered  by  the  party  or  parties  injured  to  be  an 
injustice. 

Such  being  the  case,  the  first  thing  to  consider  is  the  stan- 
dard or  money  unit  of  common  measure. 

By  the  Federal  Constitution,  power  was  conferred  upon 
Congress:  To  coin  money,  regulate  the  value  thereof,  and  of 
foreign  coin,  and  fix  the  standard  of  weights  and  measures. 

The  first  coinage  act  (April  2,  1792)  provided  that  the 
money  of  account  of  the  United  States  should  be  expressed  in 
dollars  or  units,  decimally  divided  into,  dimes  or  tenths,  cents 
or  hundredth s,  and  mills  or  thousandths;  and  that  all  accounts 
in  the  public  offices. and  all  proceedings  in  the  courts  should 
be  kept  and  had  in  conformity  thereto.  And  this  regulation 
has  remained  unaltered  ever  since.  The  next  step  was  to 
specify  what  should  represent  the  dollar  or  unit  and  its  multi- 
ples and  submultiples.  The  coinage  was  based  upon  Troy 
weight,  which  is  still  in  use;  and  a  double  standard  was 
adopted.  Theory  requires  that  a  unit  of  common  measure 


78  AMERICAN    MONEY. 

should  be  single.  And  if  a  double  standard  signifies  two 
standards  of  different  sizes,  it  is  wrong  in  theory.  If  a  gold 
dollar  and  a  silver  dollar  were  always  of  the  same  value,  then 
the  unit  of  value  is  single,  otherwise  not.  In  July,  1864,  the 
gold  dollar  was  worth  $2.85  in  greenbacks,  therefore  a  horse 
at  that  time  worth  one  hundred  dollars  in  gold  was  worth  two 
hundred  and  eighty  five  dollars  in  greenbacks.  The  paper 
dollar  and  the  gold  one  did  not  agree  as  a  unit  of  value. 

By  the  first  coinage  act  the  silver  dollar  was  required  to 
contain  371.25  grains  of  pure  silver  with  enough  alloy  to  make 
its  standard  weight  416  grains.  In  estimating  coins  the  alloy 
is  not  valued,  Collector  v.  Richards,  23  Wall,  246;  probably 
because  the  precious  or  pure  metal  would  be  worth  as  much 
without  the  alloy.  The  smaller  silver  coins  were  in  proportion 
to  the  dollar.  A  gold  eagle  ($10)  half  and  quarter  eagle  were 
also  authorized.  The  standard  weight  of  the  eagle  was  fixed 
at  270  grains,  of  which  247.50  grains  were  to  be  of  pure 
gold;  the  other  gold  coins  to  be  in  proportion.  This  act, 
therefore  assumed  that  371. 25  grains  of  pure  silver  and  24.75 
grains  of  pure  gold  were  of  the  same  value  and  would  always 
remain  so;  otherwise,  two  different  units  of  value  were 
adopted  instead  of  one.  At  that  time  the  mother  country  had 
a  double  standard,  and  it  was  no  doubt  considered  the  correct 
thing  to  have.  The  above  statute  assumed  the  relative  value 
or  ratio  of  silver  to  gold,  for  equal  weights  of  each,  to  be  15 
to  one — since  371.25  =  15x24.75.  Such  was  the  case  in  1793, 
but  never  at  any  time  afterwards.  After  that  date  gold  ap- 
preciated until  in  1813  the  ratio  was  16.25  to  1;  after  which 
there  was  a  decline  until  the  ratio  in  1859  was  15.19  to  1; 
after  which  time  the  relative  value  of  silver  depreciated  until 
in  1888  the  ratio  was  2 1.99  to  1.  The  appreciation  in  the  value 
of  gold  made  the  gold  coins  worth  more  than  their  nominal 
value  in  silver  dollars,  and  they  ceased  to  circulate.  In  regu- 
lating the  value  of  money,  a  law  may  assign  a  value  to  a  coin 
less  than  that  of  the  metal  contained  in  it  and  declare  it  to  be 
a  legal  tender  at  that  rate,  but  such  a  law  is  nugatory;  all  such 
money  is  exported  or  hoarded.  During  the  late  civil  war, 
when  a  paper  dollar  was  the  standard,  all  the  coins  disappeared 
from  circulation  and  all  current  money  even  to  five  cents  was 
in  paper. 


AMERICAN    MONEY.  79 

By  the  act  of  June  28,  1834,  the  gold  coins  were  debased 
both  in  weight  and  fineness;  the  standard  weight  of  the  eagle 
was  reduced  to  258  grains,  of  which  232  grains  were  to  be 
pure  gold,  the  other  gold  coins  to  be  in  proportion.  This 
adopted  a  ratio  of  16-|-to  1,  the  actual  ratio  between  the  two 
metals  in  1884  was  15.73  to  1.  Hence  the  gold  coins  were 
debased  too  much,  and  the  silver  coins  became  more  valuable 
pro  rata  than  the  gold  ones. 

Afterwards  by  the  act  of  January  18,  1837,  a  uniform  stan- 
dard of  nine-tenths  fine  was  adopted  for  both  gold  and  silver 
bullion.  This  reduced  the  standard  weight  of  the  silver  dollar  to 
412.50  grains — one-tenth  deducted  from  this  for  alloy  left 
371.25  grains  of  pure  silver  as  before.  The  standard  weight 
of  the  gold  coins  was  not  altered,  but  a  little  more  gold  was 
added — one-tenth  of  258  grains  deducted  for  alloy  left  232.2 
grains  of  pure  gold.  This  act  assumed  the  relative  value  of 

silver  to  gold  to  be         '    •  =  15.988-|-to  1;  and  this  has  been 

the  legal  ratio  ever  since.  The  actual  Or  market  ratio  then 
was  15.83  to  one,  and  the  value  of  silver  remained  above  the 
legal  rate  until  1874.  This  caused  the  silver  coins  to  disap- 
pear. And  in  order  to  retain  the  fractional  silver  coins  in  cir- 
culation their  weight  was  debased  in  1853;  the  standard 
weight  of  the  half  dollar  was  reduced  to  192  grains;  the  others 
in  proportion.  The  silver  dollar  disappeared  and  became  un- 
known in  circulation  until  1878,  prior  to  which  date  the  total 
number  coined  was  $8,031,238. 

If  the  ratio  as  to  value  between  silver  and  gold  had  always 
remained  the  same,  as  for  instance  at  the  rate  of  15  to  1,  as 
adopted  by  the  first  coinage  act,  then  the  two  standards  would 
have  been  continually  the  equivalents  of  each  other  and  thus 
tantamount  to  a  single  standard.  But  the  market  ratio  would 
vary  and  all  attempts  to  make  the  two  standards  agree,  proved 
to  be  futile.  Similar  experience  elsewhere  led  to  the  adoption 
of  a  single  standard  by  England,  Germany  and  other  nations. 
Each  of  the  precious  metals  has  a  use  value  of  its  own  in  the 
industrial  arts,  for  ornament,  &c;  and  the  supply  of  each  is 
independent  of  that  of  the  other;  so  that  when  both  were  free- 
ly used  in  coinage  the  varying  relation  between  the  supply 
and  demand  as  to  each  metal  caused  its  value  to  vary  from 
time  to  time.  Hence  the  relative  value  of  the  two  metals 


80  AMERICAN    MONEY. 

would  not  remain  invariable  under  a  very  general  free  coinage 
of  both.  In  the  report  of  the  director  of  the  mint  for  1889  is 
given  a  table  exhibiting  the  ratio  of  silver  to  gold  from  1687 
to  1888  both  inclusive.  In  1687  the  ratio  was  14.94  to  1;  in 
1859  it  was  15.19  to  1;  between  these  dates  the  ratio  fluctuated 
back  and  forth,  being  lowest  in  1760,  14.14  to  1,  and  highest 
in  1813,  16.25  to  1.  After  1859  the  gold  price  of  silver  de- 
clined and  rapidly  after  1871,  until  the  ratio  in  1888  was  -21. '.<'.> 
to  1.  This  was  due  to  a  great  decrease  in  the  demand  for  it 
for  coinage  and  a  great  increase  in  the  supply.  The  annual 
silver  product  of  the  United  States  increased  from  31,550,000 
fine  ounces  in  1879  to  50,000,000  fine  ounces  in  1889;  and  the 
world's  product  increased  nearly  twenty  per  cent,  from  1885 
to  and  including  1888.  In  spite  of  the  great  increase  in  trade 
and  business  it  is  likely  that  the  use  value  of.  the  precious 
metals  for  money  has  been  much  impaired  by  the  greatly  in- 
creased facilities  for  doing  business  resulting  from  the  effects 
of  steam  and  electricity,  the  use  of  paper  money  and  of  all  the 
various  forms  of  credit.  And  it  is  not  demonstrable  that  the 
adoption  of  a  single  gold  standard  by  Germany  and  other  na- 
tions enhanced  the  value  of  money  relative  to  land,  labor  and 
other  things.  It  also  remains  to  be  seen  whether  all  the  gold 
and  silver,  less  the  quantity  used  in  the  industrial  arts,  is  act- 
ually needed  for  use  as  money.  If  all  credit  "currencies  were 
abolished  there  would  be  a  greater  demand  for  coin. 

The  next  alteration  in  the  money  unit  was  the  adoption  of 
a  paper  (greenback)  dollar  as  the  standard  of  value.  In  1861 
the  Southern  States  attempted  to  secede  from  the  Union  and 
civil  war  ensued;  and  in  December  1861  specie  payments  were 
suspended  and  not  resumed  until  January  1,  1879.  The  war 
was  of  colossal  magnitude  and  from  necessity  it  was  prose- 
cuted upon  credit.  A  national  currency  was  required.  The 
effort  to  furnish  through  the  mints  a  hard  money  currency 
had  failed;  the  paper  money  issued  by  state  banks  continually 
drove  out  the  specie.  The  United  States  notes  (greenbacks) 
were  first  authorized  by  the  act  of  February  25,  1862.  They 
were  made  lawful  money  and  a  legal  tender  for  all  debts  pub- 
lic and  private,  except  duties  on  imports  and  interest  upon  the 
public  debt.  Except  for  these  purposes  the  greenback  dollar 
furnished  the  unit  of  value  from  its  first  issue  in  1862  until 
January  1,  1879.  The  gold  dollar  was  worth  in  paper,  in  1862 


AMERICAN    MONEY.  81 

from  $1.014  to  $1.34;  in  1864  from  $2.85  to$1.51^;  in  1878 
from  $1.02  J  to  $1.00.  When  the  gold  dollar  was  worth  $2.85 
in  paper,  the  paper  dollar  was  worth  $0.35-)-  in  gold.  When 
brought  to  face  the  necessity,  Congress  found  authority  for 
this  paper  money  among  its  implied  powers.  Under  the  power 
to  borrow  money,  bills  of  credit  in  a  form  fit  for  circulation 
as  money  could  be  issued,  and  this  power,  and  other  express 
powers  justified  making  the  bills  lawful  money  and  a  legal 
tender  in  payment  of  debts.  It  became  manifest  during 
the  civil  war  and  afterwards,  and  it  was  also  quite  evident  be- 
fore, that  Congress  could  not  regulate  the  value  of  money 
unless  it  took  exclusive  control  of  the  currency. 

After  the  issue  of  greenbacks,  there  were  three  kind«of  legal 
tender,  United  States  notes,  gold  coin  and  silver  dollars.  But 
the  silver  dollars  had  disappeared  long  before;  in  1859  a  silver 
dollar  was  worth  $1.05  in  gold.  In  like  manner  the  paper 
dollar  supplanted  the  gold  one.  At  this  time  there  are  four 
kinds  of  legal  tender,  namely,  gold  coin,  silver  dollars,  green- 
backs and  treasury  notes  issued  for  the  purchase  of  silver  un- 
der the  act  of  July  14,  1890.  And,  at  this  time,  none  of  these 
kinds  are  soft  enough  to  suit  the  debtor. 

It  is  lawful,  if  practicable,  to  buy  or  borrow  in  terms  of  a  high 
priced  dollar  and  sell  or  pay  back  by  a  cheap  one.  Thus  it 
was  held  that  a  debt  incurred  previous  to  the  issue  of  green- 
backs could  be  paid  afterwards  in  paper;  Legal  Tender  cases, 
12  Wall.  457.  And  it  was  said  by  the  Court  in  Juilliard  y. 
Greeman  110  U.  S.  Rep.  421,  that  Congress  may,  as  it  had 
done,  debase  the  standard  coin  and  thereby  enable  debtors  to 
discharge  their  debts  by  payment  in  the  baser  coins.  And 
also,  that  a  contract  to  pay  a  certain  sum  in  money,  without 
any  stipulation  as  to  the  kind  of  money  in  -which  it  shall  be 
paid,  may  always  be  satisfied  by  payment  of  that  sum  in  any 
currency  which  is  lawful  money  at  the  place  and  time  at 
which  payment  is  to  be  made,  citing,  Hale,  P.  C.  192,194: 
Bac.  Abr.  Tender,  B.  2:  Pothier.  Contract  of  Sale,  No.  41G: 
Pardessus,  Droit  Commercial,  Nos.  204,  205.  Seawright  v. 
.Calbraith  4  Pall.  324.  And  it  was  also  said,  that  the  obliga- 
tion of  parties  is  always  assumed  with  reference  to  the  power 
of  the  government  over  the  currency.  Although  it  has  been 
adjudged  that  a  creditor  may  stipulate  for  payment  in  a  specific 
kind  of  dollars  (Bronson  v.  Rodes.  7  Wall.  229)  yet  it  is  not 


82  AMERICAN    MONEY. 

clearly  settled  that  this  privilege  may  not  be  taken  away  or 
nullified.  Congress  has  the  power  to  alter  the  money  standard, 
debase  the  coin  and  make  bills  of  credit  a  legal  tender;  but  an 
alteration  of  the  standard  unit  of  common  measure  is  only  justi- 
fiable for  sufficient  reasons:  as  for  instance,  to  save  the  Union 
in  a  great  civil  war,  or  avert  some  other  great  catastrophe. 
Since  Congress  has  this  power,  it  is  the  sole  judge  of  the 
necessity  for  its  exercise,  as,  if  it  should  desire  to  raise  the 
price  of  silver  by  buying  large  amounts  and  emitting  bills  of 
credit  therefore,  or  otherwise  to  soften  the  money  by  other 
issues  of  paper. 

In  the  absence  of  any  such  an  overruling  necessity,  some 
think  that  the  money  standard  ought  to  be  single  and  as  per- 
manent and  invariable  as  possible,  and  that  a  double  standard 
is  objectionable  because  the  two  units  of  common  measure 
may  not  always  agree.  At  this  time  there  is  a  compound 
double  standard,  to-wit,  two  of  coin  and  two  of  paper.  Now 
it  was  said  formerly,  Deut.  25.13:  Thou  shalt  not  have  in  thy 
bag  divers  weights  a  great  and  a  small:  Thou  shalt  not  have 
in  thine  house  divers  measures  a  great  and  a  small.  In  those 
days  money  passed  by  weight — as  standard  coins  ought  to  do 
now.  Excepting  as  to  money  it  is  still  considered  to  be  dis- 
honest to  alter  the  unit  of  common  measure,  as  to  past  tran- 
sactions still  current;  or,  to  have  divers  weights  in  the  bag,  or 
divers  measures  in  the  house. 

.  In  the  revision  of  the  coinage  law  (Feb.  12,  1873)  the  coin- 
age of  the  silver  dollar  was  discontinued;  it  was  then  still 
worth  more  than  a  dollar  in  gold. 

The  act  of  Feb.  12,  1873,  provided  that  the  standard  for 
both  gold  and  silver  coins  of  the  United  States  should  be, 
such,  that  of  one  thousand  parts  by  weight  nine  hundred 
shall  be  of  pure  metal  and  one  hundred  of  alloy:  the  alloy  of 
the  silver  coins  to  be  of  copper,  of  the  gold  coins,  copper  or 
copper  and  silver,  but  the  silver  in  no  case  to  exceed  one- 
tenth  of  the  alloy. 

Also,  that  the  gold  coins  of  the  United  States  should  be  a 
one  dollar  piece  which  at  the  standard  weight  of  25.8  grains 
should  be  the  unit  of  value;  the  other  gold  coins  to  be  a  three 
dollar  piece,  a  ten  dollar  piece  or  eagle,  and  a  double,  half  and 
quarter  eagle,  of  standard  weights  in  proportion  to  that  of  the 
gold  dollar. 


AMERICAN    MONEY.  83 

The  theory  of  this  law  is,  that  a  dollar  in  gold  coin,  is  a 
piece  of  gold  certified  to  be  of  a  certain  weight  and  purity  by 
the  form  and  impress  given  to  it  at  the  mints  of  the  United 
States.  Any  number  of  such  dollars  is  the  number  of  grains 
of  standard  gold  in  one  dollar  multiplied  by  the  given  num- 
ber, Bronson  v.  Rodes  7  Wall.  229.  Ever  since  the  resumption 
of  specie  payments,  January  1,. 1879,  all  wealth  and  wealth 
value  have  been  estimated,  measured  and  computed  throughout 
the  United  States  in  terms  of  the  gold  dollar  and  its  value. 
By  a  recent  act,  the  coinage  of  the  gold  dollar  and  three  dollar 
piece  is  to  cease,  and  these  coins  as  fast  as  paid  into  the 
Treasury  are  to  be  withdrawn  and  made  into  the  other  denom- 
inations of  gold  coin.  This  act,  however,  will  make  no 
change  in  the  unit  of  wealth  and  value.  Until  a  change  of 
standard  actually  takes  place,  the  unit  of  wealth  and  value 
will  be  23.22  grains  of  pure  gold,  as  it  now  is.  The  gold  dol- 
lar is  too  small  a  coin  for  ordinary  use:  and  the  three  dollar 
piece  is  not  needed. 

Coinage  is  a  certificate  of  the  weight  and  purity  of  the 
metal  contained  in  the  piece:  it  is  a  labor  saving  device.  With 
a  proper  series  of  pieces  all  payments  can  be  made  by  a  mere 
count  of  coins.  Standard  coins,  therefore,  now  pass  by  weight 
just  as  the  precious  metal  did  before  coinage  was  invented. 
Token  money  stands  upon  a  different  footing  as  hereinafter 
explained.  When  the  precious  metal  was  used  in  bulk  as 
money,  it  was  not  easy  to  ascertain  its  weight  and  fineness. 
Coinage  is  intended  to  meet  these  objections,  and  the  law  re- 
quires great  exactness  in  the  execution  of  the  coinage  and  in 
order  to  secure  it,  enters  into  great  detail. 

Even  by  the  exercise  of  the  highest  knowledge  and  skill 
and  of  the  use  of  the  best  known  appliances,  the  standards 
for  weight  and  fineness  cannot  be  exactly  complied  with; 
therefore,  a  certain  deviation  or  tolerance  is  allowed;  but 
which,  it  is  illegal  to  exceed  And  the  law  declares  that  the 
gold  coins  of  the  United  States  shall  be  a  legal  tender  in  all 
payments  at  their  nominal  value,  when  not  below  the  stan- 
dard weight  and  limit  of  tolerance  provided  by  law  for  the 
single  piece,  and,  when  reduced  in  weight  below  such  stan- 
dard and  tolerance  shall  be  a  legal  tender  at  a  valuation  in 
proportion  to  their  actual  weight. 


84  AMERICAN    MONEY. 

The  deviations  allowed  by  law  as  to  the  various  coins  are: 

In  fineness:  No  ingots  shall  be  used  for  coinage  differing 
from  the  standard  more  than:  in  gold  ingots,  one  part  in  a 
thousand,  or  0.001:  in  silver  ingots,  0.003:  in  minor  alloys, 
0.025  in  the  proportion  of  nickel. 

In  weight:  The  following  deviations  shall  not  be  exceeded 
in  any  single  piece:  double  eagle  and  eagle  £  a  grain:  each  of 
the  other  gold  coins  \  of  a  grain:  each  silver  coin  l£  grains: 
each  five  cent  piece  3  grains:  each  3  cent  and  one-cent  2 
grains.  And  in  weighing  a  number  of  pieces  together,  when 
delivered  by  the  coiner,the  deviations  from  the  standard  shall 
not  exceed  in  every  $5,000  in  double  eagles,  eagles,  half  and 
quarter  eagles,  and  in  every  one  thousand  three  dollar  and 
dollar  pieces  T^  of  an  ounce:  in  one  thousand  silver  dollars, 
halves  and  quarters  rf ^  of  an  ounce:  and  in  one  thousand 
dimes  T^¥  of  an  ounce.  If  any  coins  executed  are  found  to 
deviate  from  standard  more  than  the  legal  limits,  they  are 
required  to  be  defaced  and  recoined.  The  coinage  is  in  fact 
effected  at  an  actual  deviation  of  about  one-half  of  the  legal 
tolerance. 

Coins  lose  in  weight  by  use  and  wear;  this  being  caused  by 
the  public  is  a  proper  public  charge.  And  the  law  provides 
that:  Any  gold  coins  of  the  United  States,  if  reduced  in 
weight  by  natural  abrasion  not  more  than  one-half  of  one  per 
centum  below  the  standard  weight  provided  by  law  after  a 
circulation  of  twenty  years  as  shown  by  the  date  of  coinage, 
and  at  a  rateable  proportion  for  any  less  period,  shall  be  re- 
ceived at  theii1  nominal  value  by  the  United  Slates  Treasury 
and  its  offices,  under  such  regulations  as  the  Secretary  of  the 
Treasury  may  prescribe  for  the  protection  of  the  Government 
against  fraudulent  abrasion  and  other  practices:  also,  any 
gold  coins  in  the  Treasury  when  reduced  in  weight  by 
natural  abrasion  more  than  one-half  of  one  per  centum  below 
the  standard  weight  prescribed  by  law  shall  be  recoined. 

Provision  is  made  from  time  to  time  for  the  recoinage  of 
light  and  worn  silver  coins. 

The  law  also  provides  that:  No  foreign  gold  or  silver  coins 
shall  be  a  legal  tender  in  payment  of  debts;  also,  that  all 
foreign  gold  and  silver  coins  received  in  payment  for  moneys 
due  to  the  United  States  shall,  before  being  issued  in  circula- 
tion, be  coined  anew. 


AMERICAN    MONEY.  85 

Almost  every  nation  has  a  standard  and  money  system  of 
its  own,  and  foreign  money  is  not  available  to  them  for  circu- 
lation; therefore,  foreign  money  is  generally  worth  no  more 
than  its  bullion  value.  Excepting,  however,  that  Mexican  and 
Spanish  dollars  are  current  in  China  and  the  far  East,  and 
Austrian  (Maria  Theresa)  thalers  in  the  Levant.  For  export 
the  newest  and  heaviest  coins  are  the  most  profitable;  but  in 
paying  a  draft  from  abroad  the  light  coins,  if  still  within  the 
standard  and  tolerance,  are  quite  sufficient  for  the  purpose. 
Fine  bars  are  the  most  suitable  for  exportation,  because  coins 
even  when  newly  made  are  not  exact  and  the  variation  be- 
comes very  perceptible  where  large  amounts  are  involved.  No 
one  could  measure  a  mile  accurately  with  a  foot  rule.  The  coin- 
age mints  and  the- assay  office  at  New  York  make  both  gold 
and  silver  bars,  none  of  less  weight  than  five  ounces.  They  are 
required  by  law  to  be  stamped  designating  their  weight  and 
fineness  and  with  such  devices  impressed  thereon  as  may  be 
deemed  expedient  to  prevent  fraudulent  imitation.  Gold 
bullion  may  be  deposited  to  be  made  into  coin  or  bars:  silver 
bullion  to  be  formed  into  bars  only.  Any  deposit  of  less 
value  than  $100  may  be  refused;  also,  bullion  so  base  as  to  be 
unsuitable  for  the  operations  of  the  Mint.  The  charges  are 
enough  to  cover  the  cost  only.  No  charge  is  made  for  con- 
verting standard  gold  bullion  into  coin:  nor  upon  other  gold 
bullion  except  to  prepare  it  for  coinage. 

On  deposits  of  gold  coin,  United  States  mint  or  assay  office 
bars,  or  fine  gold  bars  bearing  the  stamp  of  well  known  refin- 
eries payment  therefor  may  be  made  at  once  within  two  per 
cent,  of  the  value  contained  therein,  provided  no  partial  pay- 
ment shall  be  made  on  a  deposit  of  less  value  than  $5,000. 

Gold  bars  are  also  exchanged  at  the  coinage  mints  and  the 
New  York  assay  office  for  gold  coin  of  legal  weight  offered 
in  sums  of  not  less  than  $5,000. 

During  the  fiscal  year  ending  June  30,  1888,  the  amount  of 
gold  bars  made  was  nearly  fifty-two  millions  of  dollars  and  of 
silver  bars  about  seven  and  one-half  millions  of  dollars  at 
coining  value.  During  the  fiscal  year  1889,  the  amount  of 
gold  bars  made  was  about  twenty-two  millions  and  one  quarter, 
and  of  silver  bars  about  six  millions  and  three-quarters  at 
coining  value. 


86  AMERICAN    MONEY. 

In  commerce  and  other  intercourse  with  foreign  nations  it 
becomes  necessary  to  convert  foreign  money  into  our  own 
and  vice  versa.  Foreign  trade  is  not  conducted  by  way  of 
barter,  unless  with  savages,  but  is  carried  on  by  two  sets  of 
men,  called  exporters  and  importers.  The  exporter  of  cotton, 
bread  stuffs,  provisions;  mineral  oil,  tobacco,  &c.,  is  one  man; 
the  importer  of  sugar,  coffee,  tea,  dry  goods,  &c.,  is  another. 
An  article  exported  is  sold  in  the  foreign  market  in  the 
money  of  that  country:  and  it  is  necessary  for  the  exporter 
to  know  that  the  price  realized  when  converted  into  American 
money  and  returned  to  him  will  leave  him  a  profit,  and  he 
seeks  the  best  market.  So  also  the  importer  of  a  commodity 
buys  it  in  the  foreign  market  in  foreign  money  and  it  is  nec- 
essary for  him  to  know  that  the  price  realized  at  home  will 
leave  him  a  profit;  and  he  also,  seeks  the  best  market.  The 
total  declared  value  of  the  imports  of  foreign  merchandise 
and  of  exports  of  domestic  and  foreign  merchandise  for  the 
fiscal  year  ending  June  30,  1889  were;  exports,  $745,131,652; 
imports,  $742,401,375.  Over  half  of  the  domestic  exports 
went  to  Great  Britian,  while  only  one  quarter  of  the  imports 
came  from  that  country.  The  imports  from  Brazil  (coffee, 
rubber,  &c.,)  were  $60,403,804;  the  exports  to  $9,351, 081.  The 
imports  from  Cuba  (sugar,  cigars,  &c.,)  were;  $52,130,623; 
exports  to  $11,691,311.  The  imports  from  the  Philippine 
Islands  were  $10,593,172;  exports  to  $179,647.  Imports  from 
China  $17,028,412;  exports  to  $2,791,128,  &c.,  &c. 

And  there  was  also  exported  during  the  above  fiscal  year 
in  excess  of  the  amounts  imported,  in  gold  $59,952,285;  in 
silver,  $36,689,248.  The  greater  part  of  this  went  to  England 
in  the  first  place. 

Neither  the  exporter  nor  the  importer  concerns  himself 
about  the  balance  of  trade  except  so  far  as  it  may  effect  the 
price  of  bills  of  exchange.  The  exporter  has  foreign  bills  to 
sell  and  the  importer  foreign  bills  to  buy.  The  importer  of 
coffee  from  Brazil  is  likely  to  pay  for  it  by  bills  on  London; 
and  the  importer  of  sugar  from  Cuba  probably  gets  his  ex- 
change or  Spanish  doubloons  at  the  same  place. 

The  balances  in  international  trade  are  adjusted  by  those 
who  deal  in  bills  of  exchange.  The  principal  international 
clearing  house  is  London. 


AMERICAN    MONEY,  87 

In  exercise  of  the  power  to  regulate  the  value  of  foreign 
coin,  it  was  enacted  (March  3,  1873):  The  value  of  foreign 
coins  as  expressed  in  the  money  of  account  of  the  United 
States  shall  be  that  of  the  pure  metal  of  such  coin  of  standard 
value;  and  the  values  of  the  standard  coins  in  circulation  of 
the  various  nations  of  the  world  shall  be  estimated  annually 
by  the  Director  of  the  Mint  and  be  proclaimed  on  the  first 
day  of  January  by  the  Secretary  of  the  Treasury.  The 
second  section  of  the  act  fixes  the  value  of  the  sovereign  or 
pound  sterling  of  Great  Britain  at  $4.8665,  and  declares  that 
this  valuation  shall  be  the  par  of  exchange  between  Great 
Britain  and  the  United  States:  and  also  that  all  contracts 
made  after  the  first  day  of  January  1874  based  upon  an  as- 
sumed par  of  exchange  with  Great  Britain  of  fifty-four  pence 
to  the  dollar,  or  four  dollars  and  forty-four  and  four  ninths 
cents  to  the  sovereign  or  pound  sterling  shall  be  null  and  void. 
This  rate  of  fifty  four  pence  to  the  dollar  was  an  antiquated 
and  fictitious  par  of  exchange,  which  is  said  to  have  had  its 
origin  in  colonial  tirries,  when  there  was  a  silver  standard  in 
England  and  Spanish  dollars  were  current  in  the  colonies. 

The  Director  of  the  Mint  in  making  the  estimate  for  the 
year  1889  proceeded  as  follows:  In  estimating  the  value  of 
foreign  coins,  the  value  of  the  monetary  unit  of  countries 
having  a  gold  or  double  standard  was  ascertained  by  com- 
paring the  amount  of  pure  gold  in  such  unit  with  the  pure 
gold  in  the  United  States  dollar:  the  silver  coins  of  such 
countries  were  given  the  same  valuation  as  the  corresponding 
gold  coins  with  which  they  are  interchangeable.  In  countries 
having  a  silver  standard  the  value  of  silver  coins  was  fixed  at 
the  gold  value  of  the  pure  silver  contained  in  such  coins 
based  upon  the  average  price  of  silver  in  London  for  a  period 
embraced  between  Oct.  1  and  Dec.  24  18.88.  This  price  was 
42.911  pence  per  ounce  British  standard  (0.925  fine),  equiva- 
lent at  the  par  of  exchange  to  $0.94  per  ounce  fine. 

Silver  is  quoted  in  London  at  so  many  pence  per  ounce 
(0.925  fine),  in  gold;  in  New  York  at  so  many  cents  per  ounce 
(fine)  in  gold.  The  market  price  of  silver  in  London  fixes 
its  value  elsewhere. 

This  estimate  of  foreign  coins  made  and  proclaimed  an- 
nually fixes  their  value  relative  to  our  own  for  custom  house 
purposes  and  all  others.  It  is  called  the  par  of  exchange  be- 


88  AMERICAN    MOXEY. 

tween  this  country  and  the  others  respectively.  Where  a 
foreign  nation  had  a  double  standard  its  silver  coins  were 
treated  as  local  and  domestic  tokens  of  the  country  to  which 
they  belonged.  But  in  the  case  of  Japan  its  money  unit  (yen) 
was  computed  both  in  gold  and  silver,  with  a  note  appended 
that  the  silver  standard  was  the  one  in  use.  Computed  as 
above,  the  gold  yen  was  worth  $0.997  and  the  silver  yen 
$0.734.  In  assessing  ad  valorem  duties  upon  an  importation 
of  Japanese  goods,  it  would  be  very  material  whether  the  yen 
mentioned  in  the  invoice  was  considered  as  equal  to  $0.997 
or  only  to  $0.734.  In  Japan  goods  were  bought  and  sold  in 
terms  of  the  silver  yen  as  the  unit  of  value. 

As  the  gold  dollar  or  23.22  grains  of  pure  gold  furnishes 
both  the  legal  and  actual  unit  of  value  in  this  country,  the 
computation  of  the  value  of  foreign  coins  taking  it  as  the 
basis,  was  obviously  correct.  And  the  value  of  the  standard 
sovereign  or  pound  sterling  which  consists  of  113¥^5  grains  of 
pure  gold  may  be  found  by  dividing  the  latter  amount  by  the 
former. 

The  Director  of  the  Mint,  in  his  report  for  1889,  p.  31,  gives 
a  table  showing  exports  of  gold  bars  from  May,  1888,  to  Sep- 
tember, 1889,  to  the  amount  of  $61,435,989.00,  and  the  price 
of  sight  exchange  at  the  several  dates  of  shipment.  And  he 
says,  p.  32:  "It  will  be  seen  that  the  bulk  of  the  shipments 
took  place  at  dates  when  exchange  was  between  $4.88^  and 
$4.89.  The  cost  of  transporting  gold  bars  from  New  York  to 
Europe  is  about  one-eighth  of  one  per  cent.,  and  the  cost  of 
insurance  from  nine  one-hundredths  to  three-sixteenths  of  one 
per  cent.,  so  that  it  would  not  be  profitable  to  ship  bullion,, 
rather  than  to  buy  exchange,  if  the  price  of  exchange  was  be- 
low $4.88.  As  regards  shipments  to  London,  the  well- 
known  fact  that  the  Bank  of  England  pays  for  gold  only  77s. 
9d.  per  ounce,  British  standard  (0.916f  fine),  while  it  sells 
gold  at  the  rate  of  77s.  10-^d.,  equivalent  to  a  coining  charge 
of  1^  pence  per  ounce,  would  not  induce  shipments  of  gold  to 
London.  The  margin  of  l£  pence  per  ounce,  at  the  Bank  of 
England,  between  the  buying  and  selling  prices  of  gold, rather 
encourages  shipment  of  gold  from  London,  as  owners  of  bul- 
lion in  London  will  accept  any  price  for  shipment  above  77s. 
Pd.  per  ounce.  So  that  the  price  of  exchange  in  New  York 
would  have  to  be  nearly  84.89  before  it  would  be  profitable  to 


AMERICAN    MONETT.  89 

ship  gold  to  London,  for  sale  to  the  Bank  of  England,  in  pref- 
erence to  buying  exchange.  As  a  matter  of  fact,  most  of  the 
gold  which  recently  left  this  country  went  to  France." 

A  sovereign  is  legal  tender  in  England  so  long  as  it  weighs 
enough  to  contain  112.29-j-  grains  of  pure  gold,  so  that  if  a 
draft  on  England  or  a  debt  due  there  were  paid  in  such  light 
sovereigns  their  value  in  gold  dollars  would  be  $4.836  each, 
instead  of  $4.8665.  And  an  exportation  of  gold  from  Eng- 
land might  be  prevented  by  a  tender  of  light  sovereigns.  An 
exporter  hence  to  England,  if  paid  in  light  sovereigns,  might 
find  a  difficulty  in  realizing  out  of  them  the  par  of  exchange. 
Gold  bars  might  not  sell  for  the  same  price  for  light  sover- 
eigns as  heavy  ones.  To  provide  for  this  case  the  exporter 
would  have  to  buy  his  goods  cheaper  or  sell  them  dearer. 

If  the  silver  dollar  should  become  the  unit  of  value,  then 
the  relative  value  of  all  foreign  coins  would  undergo  great 
alteration,  and  the  section  of  the  statute  fixing  the  English 
par  of  exchange  at  $4.8665  would  require  immediate  repeal. 
For  denoting  the  gold  dollar  by  d,  the  silver  dollar  by  dl,  and 
the  pound  sterling  by  L,  then 

d*  =  v.d  (1) 

(2) 

During  the  fiscal  year  1889  the  average  value  of  silver  was 
such  as  to  make  v=0.72:  this  substituted  in  Eq.  (2)  would 
make  the  par  of  exchange  between  the  pound  sterling  and  the 
silver  dollar  $6. 759+.  In  order  to  make  v=l,  the  price  of 
silver  must  be  &1.29-J-  per  ounce  fine. 

The  relative  bullion  value  of  the  gold  and  silver  dollar  is 
as  follows:  If  the  gold  dollar  is  t7,  and  the  silver  one  d1,  and 
the  gold  price  of  an  ounce  of  fine  silver  v.  d,  then 

»&*^#  (3) 

371.25 

In  which,  if  d—dv  then  w=1.29-}-. 

And  if  r  be  the  ratio  of  silver  to  gold  as  to  value  for  equal 
weights  of  each,  and  v  .d  the  gold  price  of  an  ounce  of  pure 
silver,  then 

480       1 

Ht  (  4     I 

23.22     v 


90  AMERICAN    MONEY. 

If  w=1.29+,  then  r=15.988-|-,which  was  the  ratio  adopted 
in  1837  and  now  in  force. 

Foreign  money  is  worth  no  more  here  than  its  bullion 
value,  and  so  also  with  our  money  abroad.  A  silver  dollar 
may  pass  at  home  as  the  equivalent  of  and  as  a  token  for  a 
gold  dollar,  but  abroad  the  value  of  any  coin  is  no  more  than 
so  much  bullion. 

In  Collector  v.  Richards,  23  Wall,  246,  the  above  act  to 
fix  the  par  of  exchange  was  held  to  be  a  repeal  of  all  previous 
laws  fixing  the  value  of  foreign  coins  and  the  mode  thereby 
adopted  approved  as  being  just  to  all  concerned.  In  Cramer 
v.  Arthur,  102,  IT.  S.,  612,  suit  was  brought  on  an  alleged  over- 
valuation of  goods  imported  from  Austria  in  1874.  The  in- 
voice was  expressed  in  Austrian  paper  florins.  The  law 
authorized  the  President  to  establish  proper  regulations  for 
estimating  the  value  of  goods  imported  in  respect  to  which 
the  original  cost  should  be  exhibited  in  a  depreciated  currency 
issued  and  in  circulation  under  the  authority  of  any  foreign 
government.  Such  regulation  then  was,  that  the  value  of  for- 
eign coins  as  proclaimed  was  to  be  taken  in  estimating  custom 
duties  unless  collectors  had  fyeen  otherwise  instructed,  or 
unless  a  depreciation  of  the  value  of  the  foreign  currency  ex- 
pressed in  an  invoice  from  the  standard  of  that  country  should 
be  shown  by  a  consular  certificate.  The  value  of  the  silver 
florin  as  proclaimed  was  60.476  in  gold  and  of  the  paper  florin 
as  shown  by  the  consular  certificate  attached  to  the  invoice 
was  $0.4577:  these  estimates  were  held  to  be  conclusive  upon 
the  importer.  And  it  was  also  held  that  the  law  required 
parties  to  make  out  invoices  in  the  currency  of  the  country 
where  the  goods  were  bought  and  did  not  leave  it  to  them  to 
make  a  pretended  estimate  of  the  cost  in  a  coin  valuation. 
In  Hadden  et  al  v.  Merritt,  115  U.  S.,  25,  the  plaintiffs  had 
imported  in  1879  from  China  goods  subject  to  ad  valorem 
duties,  the  vaFiies  of  which  goods  were  stated  in  Mexican  dol- 
lars as  the  currency  of  China.  The  plaintiffs  offered  to  show 
that  the  value  of  these  dollars  as  estimated  and  proclaimed 
was  based  upon  a  comparison  between  them  and  the  American 
silver  dollar  instead  of  the  gold  one,  and  that  thereby  the 
goods  had  been  largely  over-valued.  But  the  evidence  was 
excluded  and  the  value  as  proclaimed  was  held  to  be  conclu- 
sive: that  it  was  an  executive  function  and  precluded  judicial 


AMERICAN   MONfeY.  91 

enquiry.  As  the  gold  dollar  furnished  both  the  legal  and 
actual  unit  of  value  in  1879,  it  was  both  illegal  and  unjust 
to  use  the  silver  dollar  as  the  basis  of  computation.  In  1879 
the  silver  dollar  was  worth  $0.868  in  gold:  and  in  using  it  as 
the  unit  of  value,  raised  the  duties  upon  these  Chinese  goods 
over  fifteen  per  cent.  At  the  value  of  the  silver  dollar  in 
1889,  viz.,  $0.72  in  gold,  the  duties  would  have  been  increased 
nearly  forty  per  cent. 

After  the  close  of  the  war,  in  1865,  a  contraction  of  the 
previous  paper  inflation  took  place  and  the  paper  dollar 
changed  from  a  decreasing  to  an  increasing  standard;  and  pro- 
vision was  made  by  the  act  of  January  14,  1875,  for  the 
resumption  of  specie  payments  by  the  government  upon  its 
circulating  notes  on  and  after  January  1,  1879.  The  pressure 
caused  by  the  contraction' was  severely  felt  after  1873.  The 
great  demand  for  more  money  enabled  the  producers  of  silver 
and  its  other  friends  to  pass,  over  the  President's  veto,  the  act 
of  February  28,  1878,which  provided:  There  shall  be  coined 
at  the  several  mints  of  the  United  States  silver  dollars  of  the 
weight  of  412.50  grains  (Troy),  of  standard  silver,  as  pre- 
scribed in  the  act  of  January  18,  1837,  on  which  shall  be  the 
devices  and  superscriptions  provided  by  that  act,  which  coins, 
together  with  all  silver  dollars  heretofore  coined  of  like 
weight  and  fineness,  shall  be  a  legal  tender  for  all  debts  and 
1  dues,  public  and  private,  except  where  otherwise  stipulated  in 
the  contract.  And  the  Secretary  of  the  Treasury  is  authorized 
and  directed  to  purchase  from  time  to  time,  silver  bullion  at  the 
market  price  thereof,  not  less  than  two  million  dollars  worth 
per  month,  nor  more  than  four  million  dollars  per  month, 
and  cause  the  same  to  be  coined  monthly  as  fast  as 
purchased,  into  such  dollars.  Any  gain  or  seignorage 
arising  from  this  coinage  shall  be  accounted  for  and  paid 
into  the  Treasury.  The  deviations  allowed  by  the  act 
of  1837,  and  since,  are  as  previously  stated.  Assuming 
that  all  silver  dollars  coined  are  a  legal  tender  if  they 
are  within  the  limits  of  tolerance,  it  is  probable  that  they 
cease  to  be  so  when  reduced  in  weight  below  the  prescribed 
limit.  Under  this  act  there  had  been  coined  up  to  November 
1,  1889,  in  silver  dollars,  $343,638.001,with  their  further  coin- 
age still  proceeding  at  the  lowest  limit  fixed  by  the  statute; 
the  number  of  dollars  coined  from  time  to  time  being  depen- 


92  AMERICAN'    MONEY. 

dent  upon  the  current  market  price  of  silver.  The  value  of 
the  silver  dollar  had  declined  from  above  par  in  gold  in  1873 
to  about  $0.90  in  1878.  And  this  new  and  additional  market 
for  silver  failed  to  arrest  its  decline  in  value,  so  that  in  1889 
the  value  of  the  silver  dollar  was  only  $0.72,  In  the  mean- 
time the  silver  product  of  the  United  States  increased  from 
31,550,000  fine  ounces  in  1879  to  50,000,000  fine  ounces  in 
1889. 

All  efforts  made  to  establish  a  general  free  coinage  of  sil- 
ver, upon  some  agreed  ratio  of  value  relative  to  gold,  entirely 
failed.  Those  nations  which  had  adopted  a  single  gold  stand- 
ard declined  to  re-adopt  a  double  standard  which  they  had  de- 
liberately rejected,  and  thus  disturb  their  money  systems,  in 
order  to  raise  the  price  of  silver  for  the  benefit  of  its  pro- 
ducers. If  the  adoption  of  a  single  gold  standard  had 
enhanced  money,  or  lowered  prices,  as  contended  by  the 
friends  of  silver,  the  effect  was  not  so  apparent  or  injurious  as 
to  justify  a  return  to  a  double  standard,  which  had  come  to  be 
regarded  as  medieval  and  antiquated;  especially  as  the  great 
increase  in  the  production  of  silver,  and  its  great  decline  in 
value,  seemed  to  put  the  scheme  of  an  international  double 
standard  in  the  light  of  a  mere  experiment  which  the  result 
might  fail  to  justify,  even  if  all  parties  should  adhere  to  the 
agreement  in  good  faith. 

The  real  international  medium  of  exchange  is  bullion.  Tin- 
conversion  of  one  kind  of  money  into  another  is  easy  enough 
by  the  method  which  has  been  adopted.  This  country  has  a 
far  greater  trade  with  Great  Britain  than  with  any  other  coun- 
try; and  if  the  pound  sterling  were  adopted  as  the  money  unit 
here,  or  Great  Britain  should  adopt  the  gold  dollar  and  dis- 
card the  pound  sterling,  neither  alteration  would  be  of  any 
benefit  sufficient  to  justify  the  change.  The  conversion  of 
dollars  into  pounds  sterling,  francs,  marks,  <fec.,  is  quite  easy 
enough.  Xobody  wants  to  receive  any  foreign  money  as  a 
tender  in  payment  of  debts  or  otherwise, — certainly  not 
strange  coins  of  unknown  and  unreliable  weight  and  fineness. 
It  is  unnecessary,  and  it  would  be  unjust,  to  compel  the  people 
to  accept  light  and  worn  foreign  coins  under  any  scheme  for 
an  international  American,  or  other,  monetary  union.  If  the 
other  republics  upon  this  continent  and  South  America  all 
legislate  upon  the  subject  of  money  as  much  as  the  United 


AMERICAN    MONEY.  93 

States,  it  would  be  idle  to  attempt  to  issue  an  international 
coin  or  coins  to  be  used  by  all  of  them.  Besides  any  scheme 
for  an  international  American  monetary  union  which  shall  fix 
"  the  quantity,  the  kind  of  currency,  the  uses  it  shall  have, 
and  the  value  and  proportion  of  the  international  silver  coin, 
or  coins,  and  their  relations  to  gold,"  is  evidently  an  attempt 
to  tie  the  hands  of  all  the  statesmen  and  legislators  of  all 
these  republics  and  forever  prevent  them  from  benefiting  their 
people  by  an  almost  constant  legislation  about  money.  The 
Argentine  confederation  and  perhaps  others  are  more  con- 
cerned about  paper  money  at  this  time  than  any  other  kind. 
When  silver  began  to  decline  it  would  have  been  a  great  bene- 
fit to  all  its  producers  in  both  Americas  if  a  general  free  coin- 
age of  silver  at  the  ratio  to  gold  of  fifteen  and  a  half  to  one, 
or  thereabouts,  could  have  been  brought  about  by  an  interna- 
tional agreement  to  that  effect;  but  the  non-producers  of 'silver 
would  not  concur,  and  the  scheme  failed.  If  all  nations 
could  agree  about  money,  and  adhere  to  it,  then  it  would  seem 
feasible  for  them  to  agree  in  other  matters:  as,  for  instance, 
to  dismiss  their  standing  armies  and  live  in  peace  with  each 
other.  About  two  thousand  years  ago,  Cicero  imagined  that 
a  time  might  come  when  there  would  not  be  one  law  at  Rome, 
another  at  Athens,  one  law  now  and  another  hereafter,  but 
that  among  all  nations  and  during  all  time  there  would  be  the 
same  perpetual  and  universal  law.  Such  time  has  not  yet  ar- 
rived. On  the  contrary,  in  this  country  alone,  it  requires  a 
national  congress  and  a  legislature  in  each  State  to  keep  the 
governmental  machine  from  creaking  upon  its  hinges. 

The  purchase  of  two  millions  of  dollars  worth  of  silver 
monthly  by  the  Treasury,  under  the  act  of  February  28,  1878, 
having  failed  to  arrest  the  decline  in  the  value  of  silver,  its 
friends  procured  the  passage  of  an  act  (July  14,  1890)  author- 
izing the  Secretary  of  the  Treasury  to  purchase  four  millions 
and  a  half  ounces  monthly,  or  so  much  thereof  as  may  be  of- 
fered, at  the  market  price  thereof  not  exceeding  $1  for  371.25 
grains  of  pure  silver,  and  to  issue  in  payment  for  such  purch- 
ases of  silver  bullion,  Treasury  notes  of  the  United  States  in 
such  form  and  of  such  denominations,  not  less  than  $1,  nor 
more  than  $1,000,  as  he  may  prescribe.  Such  notes  to  be  re- 
deemable on  demand  in  coin  at  the  Treasury  of  the  United 
States,  or  at  the  office  of  any  Assistant  Treasurer,  and  when 


94  AMEfctCAtf  MONEY. 

so  redeemed  may  be  re-issued,  but  no  greater  or  less  amount 
of  such  notes  shall  be  outstanding  at  any  one  time  than  the 
cost  of  the  silver  bullion  and  the  standard  silver  dollars  coined 
therefrom  then  held  in  the  Treasury,  purchased  by  such  notes; 
which  notes  are  made  a  legal  tender  in  payment  of  all  debts, 
public  and  private,  except  where  otherwise  expressly  stipu- 
lated in  the  contract,  and  also  receivable  for  all  customs,  taxes 
and  all  public  dues,  and  when  so  received  may  be  re-issued; 
also  the  Secretary  of  the  Treasury  may  redeem  the  notes  in 
gold  or  silver  coin  at  his  discretion,  "  it  being  the  established 
policy  of  the  United  States,  to  maintain  the  two  metals  on  a  par- 
ity with  each  other  upon  the  present  legal  ratio,  or  such  ratio 
as  may  be  provided  bylaw."  Two  million  ounces  of  the  silver 
purchased  are  to  be  coined  monthly  until  July  1,  1891,  after 
which  as  much  as  may  be  necessary  to  provide  for  the  re- 
demption of  the  notes,  any  gain  or  seignorage  arising  from 
such  coinage  to  be  accounted  for  and  paid  into  the  Treasury. 
Also,  "That  so  much  of  the  act  of  February  28,  1878,  en- 
titled, '  An  act  to  authorize  the  coinage  of  the  standard  silver 
dollar,  and  to  restore  its  legal  tender  "character'  as  requires 
the  monthly  purchase  and  coinage  of  the  same  into  silver  dol- 
lars of  not  less  than  $2,000,000,  nor  more  than  $4,000,000, 
worth  of  silver,  is  hereby  repealed." 

The  act  of  July  14,  1890,  contains  no  provision  making  the 
silver  dollars  to  be  coined  thereunder  a  legal  tender  inpay- 
ment of  debts:  but  they  are  made  so,  if  at  all,  by  that  part  of 
the  act  of  February  28,  1878,  which  is  not  repealed. 

As  the  amount  required  to  be  purchased  by  this  act  is  quite 
equal  to  one-half  of  the  total  annual  product  of  silver  at  this 
time,  its  friends  confidently  expect  that  its  value  will  be 
thereby  speedily  restored  to  a  parity  with  gold  at  the  present 
legal  ratio  of  15.988-f-  to  1,  or  to  $1.29-|-  in  gold  per  ounce 
fine.  Unless  this  occurs,  the  declaration  in  the  act  that  it  is 
the  established  policy  of  the  United  States  to  maintain 
the  two  metals  on  a  parity  with  each  other  upon  the 
present  legal  or  any  other  legal  ratio,  will  be  nuga- 
tory. If  the  demand  for  silver  is  sufficient  to  make 
its  market  value  $1.29-f-  per  ounce  fine  in  gold,  then 
371.25  grains  of  pure  silver  will  be  worth  23.22  grains  of  pure 
gold,  otherwise  not.  And  if  not,  then  they  will  differ  in  spite 


AMERICAH   MONEY.  95 

of  the  established  policy  of  government  as  above  declared, 
and  one  or  the  other  will  be  the  actual  standard  of  value. 

According  to  the  Director  of  the  Mint,  the  countries  which 
have  at  this  time  a  single  standard,  or  a  double  one,  are: 

Gold — Brazil,  Canada,  Denmark,  Egypt,  Germany,  Great 
Britain,  Liberia,  Norway,  Portugal,  Sweden,  and  Turkey. 

Silver — Austria,  Bolivia,  Columbia,  Equador,  Guatamala; 
Honduras,  India,  Mexico,  Nicaragua,  Peru,  Russia,  Tripoli 
and  Venezuela. 

Gold  and  Silver — Argentine  Republic,  Belgium,  Chili, 
Cuba,  France,  Greece,  Hayti,  Italy,  Japan,  Netherlands, 
Spain,  Switzerland,  and  the  United  States. 

II. 

TOKENS. 

The  specie  part  of  the  currency  consists  of  standard  coins 
and  tokens.  The  value  of  gold  varies  directly  with  its  weight; 
hence,  if  the  gold  dollar  furnishes  the  unit  of  value,  the 
value  of  the  other  gold  coins  is  in  proportion  to  their  weight, 
and  they  constitute  the  standard  coins.  All  the  other  coins 
are  tokens, — their  nominal  exceeds  their  bullion  ?alue.  They 
are  the  silver  dollar,  half  and  quarter  dollar,  dime,  five 
cent  piece,  three  cent  piece  and  cent.  By  a  recent  act  the 
coinage  of  the  three  cent  piece  is  to  cease,  and  the  same 
withdrawn;  it  is  not  needed. 

The  silver  dollar  is  a  token  because  b7l.25  grains  of.  silver 
are  worth  less  than  23.22  grains  of  gold.  If  silver  should  be- 
come worth  $1.29-f-  per  ounce  fine,  in  gold,  then  the  silver 
dollar  will  be  a  standard  coin.  Or,  if  it  shall  drive  out  of 
circulation  the  gold  coins,  then  it  will  be  a  standard  coin 
whether  it  is  of  equal  bullion  value  with  the  gold  dollar  or 
not;  for  in  such  case  the  silver  dollar  will  then  be  the  actual 
unit  of  value.  During  the  fiscal  year  ending  June  30,  1889, 
the  average  value  of  the  silver  dollar  was  $0.72  in  gold:  it 
has  always  been  worth  less  than  a  dollar  in  gold  ever  since 
1873. 

The  fractional  silver  coins  and  their  standard  weights  are: 
the  half  dollar,  weight  12£  grams  (192.9  grains);  the  quarter 
dollar  and  dime  weighing,  respectively,  one-half  and  one-fifth 
the  weight  of  the  half  dollar.  They  are  a  legal  tender  at  their 


96  AMERICAN   MONEY. 

nominal  value  in  all  sums  not  exceeding  ten  dollars,  in  full 
payment  of  all  dues,  public  and  private. 

The  minor  coins  and  their  weights  are:  live  cent  piece, 
weight  7 7. 1«."5  grains:  three  cent  piece,  30  grains;  cent,  48 
grains.  The  two  former  are  composed  of  an  alloy,  consisting 
of  75  per  cent,  of  copper  and  25  per  cent  of  nickel;  and  the 
cent  of  an  alloy  of  95  per  cent  of  copper  and  5  per  cent,  of 
tin  and  zinc  in  proportions  to  be  determined  by  the  Director 
of  the  Mint.  They  are  a  legal  tender  at  their  nominal  value 
for  any  amount  not  exceeding  twenty-five  cents  in  any  one 
payment. 

Also,  the  fractional  silver  coins  when  presented  in  sums  of 
twenty  dollars,  and  the  minor  coins  when  presented  in  sums 
of  not  less  than  twenty  dollars,  are  redeemable  in  lawful 
money  at  the  Treasury  or  any  of  its  offices;  and  if  wanted, 
can  be  obtained  there  in  exchange  for  other  money. 

The  fractional  silver  coins  were  reduced  to  tokens  by  the 
act  of  1853.  By  the  act  of  1873  their  standard  weight  was 
slightly  increased  for  the  purpose  of  bringing  them  into  con- 
formity, as  to  content  of  silver,  with  the  five  franc  coin  of  the 
Latin  Union,  and  the  money  units  of  several  states  in  Central 
and  South  America.  If  this  change  had  caused  their  use 
abroad  they  would  return  home  as  worn  and  light  coin,  to  be 
recoined  at  the  public  expense.  They  weigh  less,  and  are 
worth  less,  in  proportion,  than  the  silver  dollar.  And  the 
object  to  be  attained  by  fitting  a  local  and  domestic  token  for 
foreign  circulation  is  not  apparent. 

The  minor  coins  are  made  of  base  metal  and  of  a  conven- 
ient size,  for  good  reasons.  If  made  of  silver  they  would  be 
too  small;  and  if  made  of  base  metal  enough  to  represent 
thair  nominal  value,  they  would  be  too  large  and  heavy. 
Small  money  must  not  be  too  small  nor  too  large,  but  of  a 
size  convenient  for  common  use.  Their  nominal  is  much  more 
than  their  bullion  value;  but  their  power  as  legal  tender  is 
limited  as  above  stated. 

Such  money  is  a  necessity,  in  order  to  pay  sums  in  full  to 
the  extent  of  one  cent,  and  also  to  admit  of  retail  in  small 
sums.  Without  cents  the  daily  newspaper  could  not  be  sold 
for  one  or  two  cents.  And  in  view  of  the  variable  value  of 
silver,  the  fractional  silver  coins  are  well  enough  as  they  are. 
Both  kinds,  if  redundant,  are  redeemable  in  lawful  money, 


AMERICAN  MONET.  97 

and  are  therefore  a  credit  currency  as  well  as  tokens.  The 
silver  dollar,  while  silver  remains  below  $1.29-]-  per  ounce 
fine,  in  gold,  and  the  gold  dollar  continues  to  be  the  unit 
of  value,  is  a  mere  token.  This  fact  is  not  altered  because 
silver  dollars  are  unlimited  legal  tender  for  all  debts  and  dues 
except  where  otherwise  stipulated  in  the  contract.  In  July, 
1864,  when  gold  was  $2.  $5  in  paper,  the  fact  that  a  greenback 
dollar,  worth  about  $0.36  in  gold-,  was  a  legal  tender  fora  dol- 
lar, did  not  make  the  paper  money  equal  in  actual  value  with 
the  coin.  In  the  circulation  the  silver  dollar  occupies  the 
place  of  a  gold  dollar,  and  as  a  token  represents  it  with- 
out being  redeemable  into  it.  Silver  dollars  were  coined  be- 
yond the  number  which  would  circulate  in  specie,  for  two 
inconsistent  reasons:  in  order  to  help  the  price  of  silver,  and 
to  make  money  cheaper.  Both  of  these  objects  are  expected 
to  be  realized  by  the  recent  act. 

III. 

THE  MEDIUM  OF  EXCHANGE. 

Money  operates  as  a  medium  of  exchange.  If  the  money 
unit  is  d,  and  any  article  or  quantity  of  wealth  is  w,  and  an- 
other is  2,  then 

w  =  v.d  (5) 

z=>-i.d  (6) 

and  by  eliminating  d 
between  Eqs.  (6)  &  (6) 


which  expresses  the  relative  exchange  value  between  w  and 
z.  And  if  prices  are  quoted  in  two  money  standards,  the  par 
of  exchange  readily  converts  one  into  the  other. 

Under  date  of  March  22,  1890,  wheat  was  quoted  in  Liver- 
pool as  follows:  California  club  7s.  2-Jd.;  No.  2  red  winter,  7s.; 
No.  2  spring,  7s.  3M-.;  No.  1  Bombay,  7s.  -£d.;  Kurachee  red, 
6s.  4d.,  &c  —  with  a  difference  between  "  spot"  and  "  futures." 
Also  bacon,  long  and  short  clear,  30s.;  Cumberland  cut,  31s. 
9d.;  hams,  long  cut,  45s.  6d,.  Also,  in  New  York  same  date: 


flB  AMERICAN  MONET. 

Sugar — Raw  Muscavado,  87  test,  4jc.  refined,-  T1^c.  lower; 
extra  C,  5T\  to  5fc.;  white  extra  C,  5}f  to  5|£c.;  yellow, 
4|£  to  5i5ec.;  off  A,  5f  to  5|c.;  mold  A,  6fc.;  standard  A, 
6^c.;  confectioners'  A,  5||c..;  cut  loaf,  7  Ac.;  crushed,  n3gc.; 
powdered,  7i7eC.;  granulated,  6£c.;  cubes,  6fc. 

In  this  way  different  commodities  are  quoted  in  the  market 
according  to  their  various  grades  and  qualities.  And  from 
the  market  prices  ruling  at  any  market,  their  relative  exchange 
value  for  that  market  and  that  date  could  be  figuered  out. 
But  such  quotations  require  a  money  standard  reasonably  well 
fixed  and  invariable.  Other  things  being  equal  that  would 
be  the  best  and  most  reliable  market  which  had  the  best  sys- 
tem of  money.  During  the  great  rebellion  this  country  had 
an  elastic  and  variable  standard  and  currency  all  of  paper. 
And  the  price  in  paper  of  such  a  staple  article  as  gold  coin 
was  very  giddy.  During  June,  1864,  the  value  of  the  gold 
dollar  varied  from  $2. 50  to  11.93  in  paper;  and  during  July, 
1864,  from  $2.85  to  $2.22. 

If  the  standard  undergoes  variation,  as  in  the  case  of  a 
paper  inflation  or  otherwise,  then  din  Eqs.  (5)  and  (6)  becomes 
an  unknown  quantity.  And  experience  proves  that  the  var- 
ious articles  of  wealth  do  not  immediately  respond  to  the  ex- 
pansion of  the  currency,  but  begin  to  rise  in  price  at  differ- 
ent times,  and  move  with  different  degrees  of  rapidity.  The 
same  irregularity  occurs  in  a  contraction.  These  effects  were 
clearly  apparent  during  the  civil  war  and  afterwards. 

Under  such  a  state  of  things  both  /•  and  /%1  vary  independ- 
ently, and  the  alteration  which  occurs  in  d  is  referred  to  a 
change  in  the  value  of  i?  and  z:  and  the  more  rapid  the  infla- 
tion or  contraction,  the  more  variable  values  become.  In 
such  case  the  unit  of  wealth  and  value  is  entirely  indefinite, 
and  is  Of  all  sizes,  as  represented  by 

tf=—  :  d=L-  :  A*.  Ac.  (8) 

A  standard  of  this  kind  during  the  suspension  of  specie 
payments  in  England  consequent  upon  the  wars  of  Napoleon 
was  defined  as  "an  ideal  unit  in  terms  of  which  the  relative 
values  of  all  commodities  maybe  computed, "and  as  "expn->>- 
ing  a  sense  of  value  in  reference  to  currency  as  compared  to 
commodities."  While  such  an  ideal  unit  might  convey  "a 


AMERICAN    MONEY.  99 

sense  of  value,"  it  would  fail  to  furnish  a  means  by  which 
the  relative  values  of  commodities  could  be  computed  with 
any  accuracy,  for  the  reason  that  they  do  not  vary  in  price 
uniformly  with  the  changes  in  the  standard.  Such  a  state  of 
things  suits  the  speculator — the  market  represents  chaos,  and 
merchants  become  merely  gamblers.  Besides,  creditors  are 
impoverished  by  the  inflation;  and  afterwards,  debtors,  by 
the  collapse,  contraction  and  decline. 

A  system  of  money,  in  order  to  perform  properly  its  function 
as  a  medium  of  exchange,  should  be  based  upon  a  standard 
made  as  invariable  as  possible.  Commodities  are  measured  by 
the  bushel,  pound,  gallon,  yard,  <fcc.,  and  their  value  as  per  unit 
of  quantity  to  the  fraction  of  a  cent,  penny,  &c.,  is  measured 
according  -to  all  the  different  grades  and  qualities  by  the 
value  of  the  money  standard.  And  the  same  reason  exists 
that  it  should  be  fixed  and  remain  so  as  that  the  foot,  yard, 
pound,  and  other  measures  of  quantity,  should  remain  unal- 
tered. It  is  contrary  to  experience,  and  indeed  absurd  upon 
the  face  of  it,  that  all  the  immense  variety  of  articles,  each 
one  of  various  grades  and  qualities,  would  simultaneously  and 
immediately  respond  to  every  alteration  of  the  standard,  as,  if 
it  be  unreal,  fictitious,  unstable,  elastic,  flexible,  <fcc.;  or,  that  all 
values  would  instantly  change  in  due  proportion  to  it.  Among 
barbarians  where  barter  is  practiced,  length  may  be  measured 
by  a  man's  foot,  or  in  paces,  or  fathoms,  and  quantity  by  the 
handful,  &c.  But  civilized  men  require  something  more 
definite.  The  precious  metals  could  be  hardly  used  as  money 
when  both  their  weight  and  fineness  were  guessed  at. 

The  law  regards  it  as  a  great  crime  to  make  false  or  coun- 
terfeit money,  or  to  deface,  mutilate,  impair,  diminish,  falsify, 
scale  or  lighten  the  coin.  But  in  fact  these  are  small  offenses 
when  compared  with  an  alteration  of  the  standard  itself,  as 
by  debasing  it,  or  by  substituting  another  of  different  value 
in  its  place,  or  by  an  inflation  of  the  currency.  It  would  be 
just  as  honest,  and  no  more  injurious,  to  tamper  with  the  foot, 
pound,  yard,  and  other  units  of  common  measure. 

After  values  have  become  adjusted  to  a  system  of  money, 
tokens,  and  other  substitutes  for  the  money  itself,  are  often 
brought  into  use  and  made  to  operate  as  a  part  of  the  circu- 
lating medium.  And  this  fact  has  given  color  to  the  idea  that 
anything  which  can  be  made  to  circulate  is  good  enough  for 


100  AMERICAN  MOXEY. 

a  medium  of  exchange.  In  the  days  of  State  banks  and  gen- 
erous confidence,  a  hotel  cook  in  Xew  York  started  a  fictitious 
bank,  located  nominally  in  Wisconsin,  but  really  in  his 
kitchen.  After  printing  $100,000  in  notes,  he  made  a  con- 
tract with  a  money  dealer  to  redeem  them  in  New  York  at 
five  per  cent,  discount,  and  to  quote  them  as  good  at  that  rate 
in  his  "bank  note  detector."  This  was  at  that  time  a  fail- 
rate  of  discount  on  State  bank  money  that  far  away  from 
home.  After  a  large  amount  had  been  put  into  circulation, 
the  cook  disappeared,  leaving  the  medium  of  exchange  fur- 
nished by  him  to  render  service  to  the  country  along  with 
other  paper  money  more  lawfully  authorized,  but  in  fact  of 
little  greater  value.  Like  wheat,  provisions,  sugar,  <fcc.,  paper 
money  may  be  of  all  grades  and  qualities.  In  the- above  case 
it  lacked  a  redeemer.  In  other  cases  there  may  be  such  a 
person,  ostensibly,  but  without  the  specie  needed  for  the  pur- 
pose, or  he  may  be  located  in  some  out  of  the  way  place  and 
hard  to  find.  Or  the  paper  money  may  be  secured  by  govern- 
ment bonds  as  to  its  ultimate  payment  after  the  bank  of  issue 
is  wound  up  by  a  receiver  and  the  bonds  are  sold,  and  in  the 
meantime  redemption,  if  demanded,  is  made  difficult  and  ex- 
pensive. Or  the  paper  money  may  be  greenbacks  with  every 
facility  offered  to  get  the  specie,  and  the  best  kind  of  specie, 
thereon;  or,  of  coin  certificates,  where  the  coin  lies  in  the 
Treasury  until  the  certificate  is  presented  for  payment.  Or 
the  paper  money  maybe  Treasury  notes  issued  for  the  pur- 
chase of  silver,  redeemable  in  coin  at  the  Treasury  or  any  of 
its  offices  with  the  silver  purchased  lying  in  wait  to  make 
good  the  promise  of  payment  engraved  upon  the  notes. 

All  sales  take  place  upon  the  basis  of  an  exchange  of  equiv- 
alents: and  the  price  received  ought  to  retain  its  value  until 
the  holder  may  see  fit,  at  his  own  convenience,  to  make  use  of 
it.  Money  ought  to  be  durable;  one  of  the  chief  merits  of 
the  precious  metals  is  their  durability.  The  proper  medium 
of  exchange  is  standard  coin  and  such  paper  substitutes  for  it 
which  may  be  always  convertible  into  specie  without  cost  or 
delay.  Then  thrift  and  industry  are  encouraged;  savings  can 
be  made  and  stored  up  without  fear  of  loss.  When  confid- 
ence exists  the  people  deposit  a  large  part  of  their  savings 
in  banks  where  it  may  be  safely  kept  and  profitably  used.  But 
if  the  money  consists  of  bank  bills  and  other  tokens  for 


AMERICAN    MONEY.  101 

money,  a  currency  panic  is  liable  to  occur  and  a  large  part  of 
the  money  prove  to  be  worthless.  The  currency  ought  to  be 
such  that  the  reserves  of  the  banks  and  of  individuals  might 
be  entirely  trustworthy.  The  superstructure  of  credit  requires 
a  secure  foundation. 

A  system  of  money  ought  to  be  such  that  a  currency  panic 
would  be  impossible.  Such  a  one  would  be  a  currency  com- 
posed entirely  of  gold;  or,  if  silver  were  the  standard,  then 
entirely  of  silver.  In  either  case,  no  one  could  get  into  a 
fright  about  the  goodness  of  his  money.  Not  so,  if  the  cur- 
rency consists  mainly  of  tokens  or  of  bank  bills;  for  the 
tokens  may  cease  to  be  current,  or  the  banks  fail  or  suspend 
payment.  With  the  best  kind  of  money  a  credit  panic  might 
occur.  That  is,  a  fright,  not  about  the  goodness  of  the 
money,  but  about  getting  it.  Banks  of  deposit  may  fail  to 
pay  their  depositors  and  debtors  fail  to  pay  their  creditor* 
but  if  the  money  is  good  somebody  will  have  it;  and  property 
will  not  be  sold  for  a  mere  song.  A  combined  currency  and 
credit  panic  is  fatal  to  all  business  and  nearly  all  wealth, 
the  labor  of  a  lifetime  may  become  a  total  wreck  at  once.  In 
such  case  there  is  neither  money  nor  credit.  A  currency 
panic  is  very  liable  to  culminate  into  one  of  the  combined  sort 
Behind  it  follows  grief  and  poverty.  Hence  the  importance 
of  a  currency  about  which  there  can  be  no  fear. 

If  anything  which  will  operate  as  a  medium  of  exchange  is 
good  enough  for  money,  then  an  inconvertible  paper  currency 
issued  out  of  the  public  treasury  and  made  a  legal  tender,  is 
the  best  kind.  It  would  be  cheap,  light,  and  entirely  free 
from  loss  by  wear.  There  would  be  no  expense  or  trouble  in 
redeeming  it,  except  to  issue  a  new  bill  for  an  old  one.  Such 
was  the  currency  of  this  country  previous  to  the  resumption 
of  specie  payments  in  1879,  when  the  whole  of  it,  even  to 
five  cents,  was  in  paper.  The  credit  panic  of  1873  occurred 
during  this  period.  The  banks  failed  to  pay  their  depositors 
on  demand,  and  other  debtors  failed  to  pay  also.  But  there 
was  no  panic  about  the  paper  money.  Bank  bills  had  been 
inconvertible  ever  since  1861;  and  the  ultimate  payment  of 
national  bank  notes  was  secured  by  government  bonds.  The 
objection  to  such  a  currency  is  that  expansion  is  too  easy  and 
is  liable  to  be  too  popular.  Money  cannot  be  made  too  abun- 
dant for  debtors  and  speculators.  But  the  amount  of  a  specie 


102  AMERICAN  MONEY. 

currency  has  its  limits;  when  it  becomes  redundant,  exporta- 
tion takes  place. 

At  this  time  the  currency  consists  of  the  fractional  and 
minor  coin,  gold  coin,  silver  dollars,  United  States  notes 
(greenbacks),  Treasury  notes,  national  bank  notes,  and  coin 
certificates. 

Gold  certificates  are  issued  out  of  the  United  States  Treas- 
ury for  gold  coin,  and  silver  certificates  for  silver  dollars  de- 
posited there,  and  are  made  payable  to  the  bearer  in  the  kind 
of  coin  deposited,  which  is  required  to  be  retained  in  the 
treasury  in  order  to  redeem  the  certificates  issued  thereon 
when  presented  for  payment.  Coin  certificates  and  also 
greenbacks  are  redeemed  by  the  Treasurer  or  any  assistant 
Treasurer  if  not  mutilated,  otherwise  by  the  Treasurer  only 
according  to  certain  regulations  concerning  mutilated  paper. 
Both  kinds  of  certificates  are  receivable  for  customs,  taxes, 
and  all  public  dues,  and  when  so  received  are  to  be  reissued. 
The  gold  certificates  are  issued  in  denominations  not  less  than 
twenty  dollars  and  upwards,  to  correspond  with  the  United 
States  notes.  The  silver  certificates  are  issued  in  ones,  twos, 
fives,  tens  and  upwards,  to  correspond  with  the  United  States 
notes.  The  amount  of  the  silver  certificates  on  September  1, 
1890,  was  $308,423,071;  gold  certificates,  $157,388,269. 

United  States  notes,  or  greenbacks,  are  in  such  form  and 
for  such  amounts  as  the  Secretary  of  the  Treasury  may  pre- 
scribe, do  not  bear  interest,  are  payable  to  the  bearer  at  the 
Treasury,  and  are  lawful  money  and  a  legal  tender  for  all 
debts,  public  and  private,  except  duties  on  imports  and  inter- 
est on  the  public  debt.  Their  total  amount  is,  as  fixed  in 
1878,1346,681,016.  One  hundred  millions  of  dollars  in  gold 
is  retained  in  the  treasury  as  a  fund  for  their  redemption,  and 
when  redeemed  they  are  to  be  re-issued  and  kept  in  circula- 
tion. They  have  been  issued  in  denominations  of  $1,  $2,  $5, 
$10,  $20,  $50,  $100,  $1,000,  $10,000.  . 

The  Treasury  notes  to  be  issued  for  the  purchase  of  silver 
under  the  recent  act,  have  been  already  mentioned. 

National  bank  notes  are  issued  in  circulation  by  banks  or- 
ganized under  the  national  free  banking  system.  The  notes 
are  prepared  and  issued  to  the  banks  by  the  United  States 
Treasurer  to  an  amount  not  exceeding  ninety  per  cent  of  the 
value  of  the  United  States  bonds  deposited  with  the  Treas- 


AMERICAN  MONEY.  103 

urer  as  security  for  the  redemption  of  the  notes.  Eacli 
bank  is  required  to  keep  on  deposit  with  the  Treasurer  an 
amount  in  lawful  money  equal  to  five  per  cent  of  its  circu- 
lation for  its  redemption,  if  presented  in  amounts  of  one  thou- 
sand dollars  or  any  multiple  thereof;  otherwise  payment  must 
be  demanded  at  the  counter  of  the  bank  during  business 
hours;  if  not  paid  a  protest  is  necessary  and  a  report  made 
to  the  Comptroller  of  the  Currency  at  Washington,  who  has 
thirty  days  allowed  to  him  to  inquire  into  the  facts  and  decide 
what  to  do.  Since  these  banks  number  more  than  three  thou- 
sand, scattered  all  over  the  country,  no  one,  unless  a  banker, 
would  be  likely  to  have  as  much  as  one  thousand  dollars  in 
the  notes  of  any  one  bank.  If  redemption  were  sought  for 
any  less  sum  the  bank  might  be  one  thousand  miles  away. 
These  provisions  are  evidently  intended  to  make  redemp- 
tion costly  and  difficult.  It  is  a  method  to  evade  pay- 
ment and  enable  the  banks  to  enjoy  the  benefit  of  their  circu- 
lation without  disturbance.  National  bank  notes  are  receiva- 
ble for  all  public  debts  and  demands  due  to  the  United  States 
except  duties  on  imports. 

Ever  since  it  was  seen  that  the  National  Government  could 
lawfully  emit  bills  of  credit  in  a  form  suitable  for  common 
use  as  a  medium  of  exchange,  there  has  been  no  reason  for 
the  existance  of  bank  notes.  A  greenback  is  redeemed  in 
gold  at  the  Treasury,  and  if  not  mutilated  at  any  of  its  offices, 
while  a  national  bank  note  is  redeemable  in  any  kind  of 
lawful  money  in  manner  as  hereinbefore  stated.  Even  if  bank 
notes  were  always  redeemable  without  any  cost  or  delay,  such 
purely  theoretical  bank  notes  would  be  no  better  than  a  coin 
certificate  or  United  States  note.  The  average  circulation  of 
bank  bills  from  1862  to  1890  was  over  three  hundred  millions 
of  dollars.  If  the  people  had  used  their  own  notes,  instead 
of  this  bank  paper,  they  would  have  saved  the  interest  upon 
the  above  amount  for  all  that  time;  and  during  a  part  of  it 
they  paid  interest  at  the  rate  of  seven  and  three-tenths  per 
cent,  per  annum,  and  for  a  longer  time  at  six  per  cent,  per  an- 
num. Taking  five  per  cent,  as  the  average  rate,  the  people 
would  have  saved  by  the  use  of  their  own  notes,  in  lieu  of 
bank  paper,  over  fifteen  millions  of  dollars  annually  during 
the  whole  of  the  above  period.  Instead  of  this,  they  admin- 
istered an  elaborate  and  expensive  free  banking  system  for 


104  AMERICAN  MONEY. 

the  benefit  and  profit  of  the  private  owners  of  these  banks  of 
issue  and  donated  to  them  annually  the  above  vast  sum, which 
justly  belonged  to  the  people  themselves. 

Fortunately,  the  field  of  circulation  occupied  by  bank  notes- 
has  been  needed,  or  supposed  to  be  so,  for  the  silver  certifi- 
cates heretofore  issued,  and  hereafter  for  the  Treasury  notes  to 
be  issued  for  the  purchase  of  silver  under  the  recent  act.  All 
schemes  to  alter  the  National  banking  law  so  as  to  admit  of 
bank  inflation,  have  been  nipped  in  the  bud  by  the  friends  of 
silver.  So  that  the  prospect  now  is,  that  in  a  few  years,  bank 
notes  will  entirely  disappear,  and  the  currency  will  be  no 
longer  a  source  of  private  gain. 

A  currency  consisting  of  gold  coin  and  gold  certificates 
would  be  almost  panic  proof.  If  the  National  Treasury  lost 
the  gold  upon  which  the  certificates  were  issued,  the  whole 
people  would  be  liable  for  the  loss.  And  even  if  such  a  cur- 
rency were  composed  of  United  States  notes,  in  lieu  of  gold, 
to  the  extent  of  about  three-fifths  of  its  sum  total,  it  would  be 
quite  safe  and  reliable,  and  at  the  same  time  more  economi- 
cal. 

The  currency  as  it  now  exists  carries  the  silver  dollars,  silver 
certificates  and  National  bank  notes  as  so  many  tokens  for  a 
gold  dollar.  If  the  recent  act  for  the  purchase  of  silver  shall 
cause  a  sufficient  inflation,  a  change  of  standard  will  occur. 
The  same  may  be  said  of  the  free  coinage  of  silver,  or  an  ex- 
cessive issue  of  bank  notes  or  Treasury  notes.  The  effect  of 
such  a  change  of  standard  will  depend  very  much  upon  the 
gold  price  of  silver  at  that  time 

After  the  silver  dollar  shall  become  the  standard,  and  all 
values  have  been  adjusted  to  it,  then  silver  dollars  and  Treas- 
ury notes  issued  for  the  purchase  of  silver,  will  make  a  cur- 
rency quite  panic  proof.  But  the  probability  is,  that  in  such 
case  not  a  few  who  had  incurred  debts  in  silver  dollars,  would 
want  to  pay  back  something  cheaper,  and  call  for  legislation 
to  that  effect. 

IV. 

THE  VOLUME  OF  THE  CURRENCY. 

All  the  uses  for  money  require  a  certain  amount  of  it  to  sat- 
isfy a  permanent  and  unexcited  demand.  In  estimating  this 
amount,  it  is  not  sufficient  to  include  in  it  only  the  money 


AMERICAN  MONEY.  105 

which  is,  or  is  supposed  to  be,  in  active  circulation.  As  a 
store  of  wealth,  money  is  just  as  much  needed  as  for  a  medium 
of  exchange.  The  money  held  by  banks,  railroads,  insurance 
companies  and  other  corporations,  trustees,  dead  men's  estates, 
and  privately  among  the  people  is  all  a  necessary  part  of  the 
total  amount  required.  The  State  and  National  treasuries  re- 
quire some  money  to  be  constantly  on  hand.  Even  the  money 
which  a  man  carries  in  his  pocket,  if  allowed  to  stay  there,  is 
not  in  active  circulation.  If  money  were  made  too  poor  to 
keep,  so  that  everyone  would  be  afraid  to  hold  it  over  night, 
its  circulation  might  be  more  active  and  a  less  amount  of 
it  sufficient.  But  if  it  be  composed  of  gold  coin,  a  large 
part  of  it  is  liable  to  lodge  somewhere  in  the  hands  of  the 
people,  and  in  various  eddies  and  pools.  According  to  the 
Director  of  the  Mint,  on  July  1, 1889,  the  National  banks  held 
in  gold  coin  $73,907,610;  other  banks  and  the  people,  $293,- 
829,958.  Very  little  of  this  is  seen  in  circulation:  it  lies  at 
the  bottom  of  the  reserves.  It  is  regarded  as  trustworthy  and 
reliable  in  a  time  of  extreme  need.  Silver  is  too  bulky  for 
hoarding  purposes,  and  paper  is  too  perishable. 

Ever  since  1878  the  currency  has  been  upon  a  gold  basis, 
and  in  part  composed  of  that  metal.  It  is  a  product  of  this 
country  to  the  extent  in  value  of  about  thirty  three  millions  of 
dollars  annually.  .Deducting  about  one-third  of  this  amount 
for  the  quantity  annually  consumed  here  in  the  industrial 
arts,  the  residue  remains  for  use  as  money  or  for  exportation. 
When  the  currency  is  redundant,  gold  is  exported,  and  when 
deficient,  it  is  imported.  These  are  the  limits  of  the  fluctua- 
tion in  the  amount  of  the  currency  arising  from  natural  causes. 
Casual  demands  for  money  affect  the  rapidity  of  its  circula- 
tion and  the  rate  of  interest.  Excessive  speculation  in  stocks, 
or  other  commodities,  may  cause  a  great  stringency  in  the 
money  market.  Very  often,  in  such  cases,  the  lame  ducks 
raise  such  a  cry  that  it  sounds  like  a  panic,  and  the  National 
Treasury  is  called  upon  to  interfere,  and  make  money  easy  for 
their  benefit. 

Even  when  the  currency  is  redundant  and  the  exportation  of 
specie  is  going  on,  great  complaint  is  made  about  the  scarcity 
of  money.  Speculators  for  a  rise  want  money  very  abundant 
and  the  articles  dealt  in  scarce.  Debtors  always  complain  of 


106  AMERICAN  MONEY. 

the  scarcity  of  money,  especially  if  they  are  short  of  collat- 
erals. And  all  those  who  have  no  money  want  some.  There- 
fore the  constant  cry  for  more  money  is  no  proof  that  its 
quantity  is  deficient. 

If  money  is  made  redundant  by  thrusting  into  the  circula- 
tion more  than  is  really  needed,  its  value  declines,  and  the 
metallic  part  is  exported  until  the  excess  is  disposed  of. 
Previous  to  the  late  civil  war,  a  large  part  of  the  specie  was 
continually  driven  off  by  excessive  issues  of  State  bank  notes. 
The  war  inflation  caused  all  the  specie  to  disappear,  except  a 
certain  amount  in  gold  needed  to  pay  duties  on  imports.  Up 
to  iS*e  there  had  been  coined,  in  gold,  $1,010,900,324;  in  sil- 
"ver  dollars,  $8,031,238;  in  fractional  silver  coins, 6214,554,683; 
and  yet  all  the  money  at  that  time  in  common  use  was  of  pa- 
per. Up  to  June  30,  1889,  there  had  been  coined  at  the  mints, 
in  gold,  $1,500,666,297;  in  silver  dollars,  $341,533,888;  and  in 
fractional  silver  coins,  $225,757,363.45.  Only  about  one-third 
of  the  gold,  and  also  of  the  fractional  silver  coins  are  now  in 
the  country.  Paper  inflation  in  time  past  expelled  even  the 
small  silver  tokens.  In  order  to  make  specie  abundant,  it  is 
not  enough  to  run  the  mints  hot. 

In  any  system  of  money  two  things  must  be  kept  in  view, 
to  wit:  the  money  unit  and  the  currency  volume.  If  money 
be  made  artificially,  very  abundant,  the  dollar  will  grow  small 
in  proportion:  but  the  value  of  the  standard  coins  cannot  be 
carried  below  their  exportable  value.  With  an  exclusively 
paper  currency  the  value  of  the  money  unit  may  be  carried  by 
inflation  to  a  nominal  amount,  as  in  continental  money,  assig- 
nats,  and  the  like. 

The  numerical  amount  of  the  currency  has  a  definite  rela- 
tion to  the  magnitude  of  the  money  unit.  For  it  is  obvious 
that  if  such  unit  were  a  cent,  the  same  quantity  of  money 
would  be  numerically  one  hundred  times  as  great  as  if  the 
unit  were  a  dollar;  and  that  if  the  unit  were  an  eagle,  would 
be  only  one-tenth  as  much.  If  the  money  unit  be  denoted 
by  d,  all  the  money  by  n.  d,  and  the  volume  of  the  currency  by 
J ",  then 

V=n.d  (9) 

In  which  if  U  is  constant,  d  varies  inversely  with  //. 


AMERICAN  MONEY.  107 

The  limit  of  inflation  of  a  currency  having  a  metallic  basis 
being  the  exporting  point  for  the  standard  coins,  it  follows 
that  if  the  money  unit  were  altered  in  size  from  d  to  dlt  so 
that  d1  =  v.d,  then 

V=n.d=nl.  d1  :w'=  —  (10) 

v 

If  d  were  the  gold  dollar  and  d1  the  silver  one,  and  r  =  0.72, 

then   n1  = =  ?*  X  1.39-)-.     That  is  to  say,  if  the  volume  of 

0.72 

the  currency  were  filled  up  with  silver  dollars  worth  $0.72  in 
gold,  to  the  exporting  point  for  silver  dollars,  it  would  require 
an  increase  in  the  number  of  dollars  to  the  extent  of  over 
thirty -nine  per  cent.  This  is  the  same  as  to  say  that  if  371.25 
grains  of  pure  silver  were  the  unit  of  wealth,  and  its  value 
$0.72  in  gold — being  its  average  value  during  1889 — then  the 
same  wealth  would  measure  about  thirty-nine  per  cent,  more 
in  nominal  amount  when  measured  thereby,  than  if  measured 
in  gold  dollars — credits  excepted;  as  to  them,  the  smaller  the 
dollar  the  smaller  the  debt.  After  the  same  manner  as 
above,  it  appears  that  a  ninety  cent  standard  would  allow  of 
an  inflation  to  the  extent  of  about  eleven  percent.;  an  eighty- 
five  cent  standard,  to  the  extent  of  about  seventeen  per  cent.; 
the  smaller  the  standard,  the  greater  might  be  the  inflation. 

But  if  371.25  grains  of  pure  silver  were  worth  a  dollar  in 
gold,  viz.,  if  silver  were  worth  $1.29-j-  per  ounce  fine  in  gold, 
then  (Eq.  10)  <l=d 1  :  n—n^ .  In  such  case  the  nominal  amount 
of  the  money  would  be  the  same  by  either  standard,  and 
wealth  would  measure  the  same  in  amount  by  the  one  dollar 
as  the  other.  And  money  would  be  no  cheaper  nor  abundant 
with  such  a  silver  standard  than  with  a  gold  one.  Silver 
dollars  would  be  then  exported  as  readily  as  gold  coin.  This 
state  of  things  is  hoped  for  by  the  producers  of  silver.  On 
the  other  hand,  debtors  and  speculators  want  money  abundant 
and  cheap:  they  want  the  dollar  made  smaller. 

If  the  currency  be  metallic,  and  its  volume  so  full  that 
specie  is  exported,  then  the  standard  coins  are  at  their  bullion 
value:  for  other  nations  use  their  own  systems  of  money. 
Bullion  is  not  suitable  for  a  medium  of  exchange;  it  requires 


108  AMERICAN    MONEY. 

division  into  parts  with  the  proper  authentic  stamps  thereon, 
to  indicate  its  purity, weight  and  value.  Hence  money  may 
have,  if  it  be  deficient  in  quantity,  a  greater  value  than  the 
bullion  contained  in  it.  Owing  to  this  fact,  it  has  been  be- 
lieved that  if  a  certain  part  of  the  precious  metal  were  ex- 
tracted out  of  the  standard  coins,  they  would  have  the  same 
value  as  before;  that,  in  fact,  their  use  value  as  money,  would 
make  good  their  loss  in  bullion  value.  Acting  upon  this 
pleasant  and  lucrative  idea,  currencies  have  been,  at  various 
limes,  greatly  debased.  But  this  left  an  opportunity  for  infla- 
tion, and  the  precious  metal  extracted  being  used  for  that 
purpose,  the  result  was  to  sink  the  value  of  the  money.  Vn- 
derthe  act  of  1878  for  the  monthly  purchase  and  coinage  of 
silver  into  dollars,  they  occupied  the  place  of  the  same 
number  of  dollars  in  gold  and  passed  as  tokens  for  them. 
Hence  it  might  be  said  that  the  silver  dollars  acquired  a 
use  value  as  such  tokens  which  nominally  at  least  made  up 
their  shortage  in  bullion  value.  According  to  this  reasoning, 
if  these  dollars-  had  been  made  out  of  base  metal  or  even 
leather  instead  of  silver,  and  they  could  have  been  made  cur- 
rent, they  would  have  answered  the  same  purpose  as  if  made 
of  silver.  If  a  silver  dollar  of  the  bullion  value  of  $0.72  in 
gold  will  pass  at  par,  why  not  a  dollar  made  out  of  some 
material  only  worth  one  cent  or  less?  Whatever  token  dol- 
lars may  be  really  worth,  if  they  were  increased  continually 
and  would  remain  current,  they  would  first  expel  all  the  stan- 
dard coins  and  afterwards  cause  the  value  of  the  money  to 
sink  until  such  tokens  became  worth  only  their  bullion  value. 
In  other  words,  the  token  dollar  would  finally  become  the 
standard  and  furnish  the  unit  of  value. 

From  the  foregoing  it  is  quite  evident  that  inflation  of  the 
currency  depreciates  the  value  of  the  money  unit,  and  that 
contraction  produces  the  contrary  effect:  also,  that  any  altera- 
tion made  in  the  standard,  admits  of  a  corresponding  change 
in  the  currency  volume. 

At  this  time,  the  gold  dollar  is  the  standard,  and  the  volume 
of  the  currency  cannot  be  inflated  beyond  the  point  where  the 
exportation  of  gold  sets  in,  until  after  it  is  driven  away.  How 
much  money  now  constitutes  the  volume  of  the  currency? 
On  November  1,  1889,  all  the  money,  including  therein  bul- 


AMERICAN    MONEY.  109 

lion  in  the  mints  and  assay  offices,was,as  given  by  the  Director 
of  the  Mint  and  the  Comptroller  of  the  Currency: 

Gold  coin •.  . .  $  619,640,450 

Gold  bullion '.....  64,554,236 

Silver  dollars 343,638,001 

Silver   bullion 10,918,171 

Fractional  silver  coins 76,628,781 

Minor    coins 18,758,228 

United  States  notes 346,681,016 

National  bank  notes 202,023,415 


Total $1,682,842,298 

From  this  total  is  to  be  deducted  one  hundred  millions  of 
dollars  in  gold  held  in  the  Treasury  as  a  fund  for  the  redemp- 
tion of  the  United  States  notes,  and  which  is  counted  twice 
in  the  above  statement;  also,  there  is  to  be  deducted  not  less 
than  twenty  millions  of  dollars  in  fractional  silver  coins  lying 
in  the  Treasury  uncalled  for.  Deducting  these  two  items  from 
the  above,  leaves  the  total  amount  of  money  at  $1,562,842,298. 

On  July  1, 1889,  the  paper  money  was: 

Gold  certificates $154,048,552 

Silver  certificates 262,629,746 

United  States  notes 346,681,016 

National  banknotes 202,028,415 


Total $965,382,729 

So  that  the  relative  amounts  of  coin  and  paper  were: 

Specie I     597,459,569 

Paper 965,382,729 

Total $1,562,842,298 

Of  the  paper  money,  $448,704,431  was  a  credit  currency; 
the  residue  represented  specie  on  deposit  in  the  Treasury. 

Besides  the  surplus  in  the  Treasury  in  excess  of  the  amount 
needed  to  meet  ordinary  demands,  there  was  also  an  amount 
to  the  extent  of  five  per  cent,  of  the  bank  note  circulation 
held  to  redeem  it  as  before  mentioned;  also,  an  amount  held  in 
lieu  of  bonds  deposited  by  the  banks  to  secure  their  circula- 
tion, and  which  had  been  withdrawn,  and  which  on  October 
SI,  1889,  was  $71,816,130.  When  bank  notes  were  presented 


110  AMERICAN    MONEY. 

for  cancellation,  they  were  paid  out  of  this  fund.  By  the 
recent  act  for  the  purchase  of  silver,  this  fund  has  been  abol- 
ished and  the  bank  notes,  when  presented  for  cancellation, 
are  to  be  paid  out  of  the  general  cash  in  the  Treasury.  The 
amount  of  this  fund  on  Sept.  1,  1890,  was  $55,059,296.  This 
money,  when  put  in  circulation  by  the  purchase  of  bonds  or 
otherwise,  was  expected  to  ease  the  money  market  and  help 
speculation,  especially  in  silver  bullion.  The  excess  of  frac- 
tional silver  coins  lying  in  the  Treasury  uncalled  for  was 
caused  by  a  speculation  in  trade  dollars  which  were  put  upon 
the  Treasury  at  a  profit,  under  an  act  passed  for  the  purpose- 
No  other  use  could  be  made  of  them  except  for  coinage  into 
small  money. 

If  the  money  system  were  more  simple  the  currency  might 
possibly  consist  of  a  smaller  amount.  But  with  a  people  rich 
enough  to  afford  the  best  kind  of  money,  economy  as  to  its 
amount  is  a  secondary  consideration.  If  a  currency  based  on 
gold  is  the  best  kind,  it  would  constitute  no  objection  to  it 
that  every  old  woman  in  the  country  had  at  least  one  eagle 
safely  nested  somewhere.  Poor  money  is  poor  economy;  and 
the  saying  that  poor  people  have  poor  ways  is  especially  ap- 
plicable to  money.  Poor  money  is  only  suitable  to  pay  toll 
on  the  road  to  the  poor  house. 

Assuming  that  the  sum  of  11,562,842,298  is  all  needed  at 
this  time  for  some  purpose  or  other — and  if  it  were  not  some 
of  the  gold  coin  would  be  exported — then  the  requisite  amount 
per  head  is  about  twenty-five  dollars.  As  population  increases 
the  currency  volume  will  increase.  Hence,  if  population  in- 
creases hereafter  at  the  rate  of  two  millions  of  people  per 
annum,  a  yearly  increase  of  about  fifty  millions  of  dollars 
will  be  continually  required  in  order  to  keep  the  volume  of 
the  currency  brimming  full.  A  moderate  estimate  would  be, 
perhaps,  twenty  dollars  per  head,  involving  a  necessary  an- 
nual increase  of  forty  millions.  Before  the  rebellion,  in  1860, 
the  currency  amounted  to  about  fifteen  dollars  per  head.  But 
the  people  were  much  poorer  then  than  now;  they  had  always 
theretofore  been  kept  poor  by  broken  banks  and  dishonest 
money. 

The  annual  amount  of  Treasury  notes  to  be  issued  for  the 
purchase  of  silver  under  the  recent  act,  will  depend  upon  its 
price,  probably  over  sixty  millions.  But  the  excess  of  this 


AMERICAN    MONEY.  11] 

amount  over  the  increase  annually  demanded  by  the  growth 
of  the  country  will  cause  no  inflation  of  the  currency  until 
after  the  bank  notes  are  all  withdrawn;  nor  thereafter,  until 
all  the  gold  coin  is  exported  or  hoarded. 

The  Farmers'  Alliance,  which  has  become  powerful  enough 
at  the  polls  to  be  very  dangerous  to  present  and  prospective 
statesmen,  demand  by  their  national  platform  recently  adopted 
"  the  unlimited  coinage  of  silver,  the  abolition  of  national 
banks,  and  the  issue  of  Treasury  notes  in  lieu  of  national 
bank  notes,  in  sufficient  volume  to  meet  the  business  demands 
of  the  country  and  the  constantly  increasing  demands  of 
trade." 

This  platform  is  sound  as  to  bank  money.  The  national 
Treasury  can  fully  supply  all  demands  for  paper  money  in  the 
form  of  coin  certificates,  treasury  notes,  or  greenbacks.  Con- 
gress can  tamper  quite  enough  with  the  currency  without  any 
assistance  whatever  from  thousands  of  banks  of  issue  con- 
ducted by  private  enterprise  under  any  banking  law,  State  or 
national,  and  free  or  otherwise. 

The  demand  for  the  free  coinage  of  silver,  and  also  for  the 
issue  of  Treasury  notes  in  addition,  indicates  that  this  Alli- 
ance regard  an  annual  increase  to  the  currency  of  over  sixty 
millions  of  dollars  as  an  amount  entirely  too  small  to  suit 
their  views.  The  history  of  paper  money  might  be  studied  to* 
a  good  advantage  by  these  farmers,  who  want  abundant  and 
cheap  money  now,  and  not  at  some  indefinite  time  in  the 
future  as  a  slow  consequence  of  the  recent  act  for  the  purchase 
of  silver. 

As  there  is  now  no  fund  actually  existing  for  the  redemp- 
tion of  the  bank  notes,  they  might  be  lawfully  redeemed  by 
an  issue  of  greenbacks  or  other  Treasury  notes  under  an  act 
passed  for  the  purpose.  But  if  the  farmers,  or  "the  growing- 
demands  of  trade,"  require  an  additional  amount,  how  can 
the  bills  of  credit  be  lawfully  emitted? 

After  the  treasury  surplus  is  exhausted  perhaps  they  might 
be  paid  out  for  pensions.  Some  "  loyal "  platforms  declare 
that  the  country  owes  the  ex-soldiers  a  (money?)  debt  so  great 
that  it  never  can  be  paid.  And  a  governor  bearing  the  mar- 
tial name  of  Fifer  is  reported  to  have  named  at  a  soldiers'  re- 
union the  sum  of  three  hnndred  millions  as  a  quite  reasonable 
amount  to  be  paid  out  annually  for  pensions.  After  the  limit 


112  AMERICAN    MONEY. 

of  taxation  is  reached,  perhaps  the  ex-soldiers  might  consent 
to  take  notes  in  part  pay  on  account  of  the  balance  due  to 
them. 

Others,  less  loyal,  have  advocated  a  loan  office  at  the  Treas- 
ury for  the  benefit  of  the  poor  farmers,  for  whose  benefit  bills 
of  credit  should  be  issued  upon  real  estate  security  at  a  nom- 
inal rate  of  interest  to  all  applicants.  This  plan  is  much 
favored  by  the  wealthy  owners  of  the  Pacific  railroads,  who 
desire  to  have  the  government  debts  thereon  reduced  in  their 
rate  of  interest  from  six  per  cent,  per  annum  to  two  per  cent, 
or  less. 

The  platform  of  the  Farmers'  Alliance  leaves  it  quite  in- 
definite as  to  the  amount  of  Treasury  notes  which  would  be 
sufficient,  in  addition  to  the  free  coinage  of  silver,  "  to  meet 
the  business  demands  of  the  country  and  the  constantly  in- 
creasing demands  of  trade."  Probably  the  amount  demanded 
is  a  quantity  such  that  no  one  could  complain  of  the  scarcity 
of  money.  Some  agricultural  platforms  have  named  fifty 
dollars  per  head  of  the  population  as  about  the  correct  amount. 
Why  not  say  five  hundred  and  make  money  easy  at  once? 
Money  must  be  very  scarce  now  when  the  treasury  is  com- 
pelled to  pay  over  twenty-five  per  cent,  premium  for  four  per 
cent,  bonds  having  only  a  few  years  to  run,  and  an  offer  to 
prepay  a  year's  interest  upon  the  public  debt  is  very  slowly 
accepted.  The  farmers  might  well  question  the  right  of  the 
Secretary  of  the  Treasury  to  wet-nurse  Wall  street.  Why 
should  soothing  syrup  be  applied  there  exclusively  and  the 
cries  of  the  poor  farmers  be  allowed  to  pass  wholly  unheeded? 

V. 

MONEY  AS  A  STORE  OF  WEALTH. 

According  to  the  report  of  the  Comptroller  of  the  Currency 
for  1889,  the  deposits  of  individuals  were: 

In  National  Banks $1,475.467,560.37 

State  Banks 507,084,481.00 

Loan   and  Trust   companies 299,612,899.00 

Savings  Banks 1,444.391,325.00 

Total $3,726,556,265. 37 

The  deposits  in  savings  banks  as  above,  consisted  of  "sav- 
ings deposits,"  excepting  $19,160,976  due  on  demand  to  other 


AMERICAN    MONEY.  115 

individual  depositors.     To   the   above  may  be  added  all  the 
money  stored  away  privately  among  the  people. 

Wealth  is  not  saved  and  hoarded  up  in  perishable  products,, 
such  as  butter,  cheese,  beef,  pork,  grain,  goods,  <£c.,  but  in 
money.  And  for  lise  as  a  store  of  wealth,  money  ought  to  b& 
composed  of  some  durable  material,  so  that  savings  will  not 
spoil,  sour,  grow  musty  or  rotten,  or  otherwise  lose  their 
value.  All  wages  are  paid  and  saved  in  money;  and  savings 
usually  accumulate  in  small  sums,  to  be  afterwards  invested 
in  houses,  lands,  bonds,  stocks  and  other  property. 

Hence  the  necessity  for  good  and  durable  money.  It  ought 
to  be  not  only  good  to  use  as  a  medium  of  exchange,  but  also- 
to  lay  away  as  a  store  of  wealth  against  sickness,  old  age, 
misfortune,  or  a  wet  day.  A  man  who  has  saved  up  a  store 
of  such  material  is  never  without  friends. 

If  the  right  kind  of  money  is  in  use  among  the  people,  it 
will  continually  accumulate  in  their  hands.  It  is  said 
that  the  hoards  of  the  French  peasantry  paid  the  one  thous- 
and millions  of  dollars  in  gold,  demanded  by  the  victorious 
Germans.  England  adopted  a  single  gold  standard  in  181 6r 
and  has  since  adhered  to  it.  There  wealth  is  great.  The 
lender  seeks  a  place  where  the  rule  is,  with  what  measure  ye 
mete,  it  shall  be  measured  to  you  again;  and  he  is  satisfied 
with  a  less  rate  of  interest.  Here  the  money  has  been  upon  a 
gold  basis  ever  since  1878,  and  the  country  has  prospered  to 
an  extent  unknown  before.  Indeed  there  has  been  no  cur- 
rency panic  since  1861. 

Any  such  figures  as  those  above  given  were  impossible  in 
the  days  of  State  bank  money.  Such  a  superstructure  of 
credit  requires  a  solid  foundation.  With  a  dishonest  currency 
what  would  become  of  the  mass  of  wealth. represented  by  the 
above  figures?  If  the  money  were  worthless  and  the  banks 
suspended  and  insolvent,  all  this  wealth  would  vanish  like 
the  baseless  fabric  of  a  vision.  There  are  no  statistics  to 
show  how  much  wealth  must  have  perished  in  the  currency 
panics  of  1809,  1819,  1837,  &e.  Those  who  held  the  notes 
of  the  Farmers'  bank  of  Gloucester,  hereinafter  mentioned, 
to  the  extent  of  $580,000  and  lost  it  all,  furnish  an  illustra- 
tion. At  a  certain  time  before  the  great  rebellion  a  friend  re- 
ceived three  hundred  dollars  in  bank  notes  for  farm  products,, 
and  in  a  few  days  afterwards  the  money  was  worthless.  The 
bank  or  banks  had  failed. 


114  AMERICAN    MONEY. 

The  amount  of  the  above  deposits  tells  a  tale  of  industry 
and  economy.  It  embodies  a  vast  amount  of  toil.  It  repre- 
sents the  hopes  and  expectations  of  a  vast  number  of  people. 
These  deposits  were  made  upon  the  faith  that  the  money 
would  stay  good,  and  would  be  repaid  in  money  equal  in  actual 
as  well  as  nominal  value  with  that  deposited.  A  difference  of 
one  cent  in  the  money  unit  would  make  a  difference  in  these 
deposits  of  $37,265,562.  If  a  change  of  the  standard  hereaf- 
ter occurs  the  difference  will  probably  be  much  greater  than 
one  per  cent.  In  1889  the  average  value  of  the  silver  dollar 
was  $0.72  in  gold.  Any  one  may  compute  the  nominal 
amount  but  not  the  consequence,  of  paying  all  these  deposits 
at  a  discount  of  twenty-eight  per  cent. 

It  may  be  good  law  to  say  that  all  these  deposits  can  be 
paid  in  something  cheaper  than  that  deposited,  if  before  such 
payment  the  cheaper  money  has  been  made  a  legal  tender, — 
but  to  do  it  is  contrary  to  Deuteronomy.  In  such  case,  per- 
haps, it  would  be  a  smart  thing  to  say  to  some  poor  woman 
who  had  her  little  store  of  wealth  deposited  in  a  savings 
bank,  that,  as  to  money  the  law  of  Moses  was  not  in  force  in 
this  country,- but  that  the  doctrine  here  was,  the  devil  take 
the  hindmost. 

VI. 

PAPER    MONEY. 

This  kind  of  money  is  preferred  for  common  use  and  to 
pass  from  hand  to  hand.  It  is  easier  to  carry,  count  and  con- 
ceal than  specie,  is  not  subject  to  the  objections  of  bulk, 
weight  and  wear,  and  when  propeily  made  is  more  difficult  to 
•counterfeit  and  tamper  with  than  coin.  No  one  desires  to 
carry  about  with  him  any  more  specie  than  a  sufficient  quantity 
of  small  change.  The  chief  objection  to  paper  money  is  its 
liability  to  abuse;  its  manufacture  is  too  easy,  and  the  proper 
limit  to  its  quantity  is  too  easily  forgotten  or  disregarded. 

The  legitimate  demand  for  paper  money  is  not  a  demand 
for  more  money,  but  for  that  kind  because  of  its  superiority 
for  common  use  over  coin,  as  above  mentioned.  If  coin  is 
deposited  in  the  Treasury  and  coin  certificates  taken  in  lieu 
of  the  specie,  the  demand  for  such  paper  money  is  a  proper 
one.  And  the  demand  that  about  one-half  of  the  currency 


AMERICAN    MONEY.  115 

shall  be  in  paper  is  proper  enough.  And  if  silver  dollars  are 
to  become  the  standard  coins  and  the  people  prefer  to  lodge 
the  silver  in  the  Treasury  and  use  treasury  notes  in  its  stead, 
such  preference  is  a  reasonable  one.  But  any  demand  that 
money  shall  be  made  abundant  and  cheap  by  excessive  issues 
of  bills  of  credit,  is  absurd  and  dangerous.  The  lesson  taught 
by  over  issues  of  Continental  money  during  the  Revolution, 
and  of  other  kinds  of  paper  money  since,  ought  to  be  worth 
something. 

During  the  Revolution  paper  money  was  a  necessity;  but 
there  was  found  to  be  a  limit  to  the  amount  which  would  cir- 
culate, although  these  drafts  upon  the  future  were  backed  by 
unlimited  patriotism.  Both  the  Continental  Congress  and 
the  several  colonies  emitted  bills  of  credit  to  very  large 
amounts.  In  the  absence  of  cash  the  colonies  fought  the 
mother  country  jointly  and  severally  on  credit.  Overissue 
destroyed  the  value  of  the  money. 

After  the  adoption  of  the  Federal  constitution,  it  was  very 
generally  supposed  that  paper  money  was  entirely  prohibited. 
It  was  provided  therein  that  "  no  State  shall  coin  money, 
emit  bills  of  credit,  make  anything  but  gold  and  silver  a  ten- 
der in  payment  of  debts,  or  pass  any  law  impairing  the  obli- 
gation of  contracts  ;"  and  no  express  power  was  conferred 
upon  Congress  to  do  any  of  these  things,  except  "  To  coin 
money,  regulate  the  value  thereof,  and  of  foreign  coins,  and 
fix  the  standard  of  weights  and  measures.1' 

A  written  constitution  is  construed  according  to  its  legal 
import  and  so  as  to  give  effect  to  the  intention,  not  of  its 
framers,  but  of  the  people  in  adopting  it.  And  if  it  were  in- 
tended by  its  makers  that  the  Federal  constitution  should  pro- 
hibit the  issue  or  use  of  paper  money  entirely,  the  necessary 
words  were  not  inserted  in  the  instrument.  For  it  was  very 
shortly  afterwards  adjudged  and  held,  that  bank  notes  issued 
under  National  as  well  as  State  authority  were  not  prohibited, 
and  finally,  that  Congress  could  emit  bills  of  credit  and  make 
them  lawful  money  and  a  tender  in  payment  of  debts.  Paper 
money,  like  coinage,  was  a  great  invention;  and  it  was  not  its 
use  but  its  abuse  which  needed  prohibition. 

In  1791  the  first  United  States  bank  was  incorporated  with 
a  capital  of  ten  millions,  and  to  continue  twenty  years.  Sub- 
scription by  individuals  were  to  be  paid  one-fourth  in  specie 


116  AMERICAN    MONEY. 

and  three-fourths  in  public  stocks  bearing  interest.  The  gOA •- 
ernment  was  to  subscribe  for  one-fifth  of  the  stock  to  be  paid 
in  cash,  and  the  amount  reloaned  to  the  government  payable 
in  ten  annual  instalments.  There  wes  no  money  in  the  treas- ' 
ury  to  pay  for  this  stock,  and  it  was  paid  for  as  follows:  Bills 
were  drawn  on  the  American  Commissioners  for  loans  in  Am- 
sterdam for  the  two  millions,  and  which  were  purchased  by 
the  bank;  the  money  thus  realized  was  at  once  used  to  pay 
for  the  bank  stock;  whereupon  the  bank  loaned  to  the  govern- 
ment two  millions  to  be  repaid  as  above  by  delivering  to  its 
treasurer  the  above  drafts,  which  had  been  nominally  di>- 
counted  at  the  bank.  This  neat  way  of  paying  for  bank  stock 
was  very  generally  practiced  afterwards  by  those  wrho  sup- 
plied the  country  with  a  currency.  They  discounted  their 
notes  at  the  banks  which  they  had  created  for  an  amount  suf- 
ficient to  pay  for  their  stock  subscriptions. 

State  banks  were  also  established  everywhere  with  a  nomi- 
nal capital,  in  the  aggregate  to  a  very  large  amount.  A  bank 
in  those  days  meant  a  bank  of  issue;  it  was  a  piece  of  ma- 
chinery organized  for  the  purpose  of  issuing  paper  money. 
There  was  a  currency  panic  in  1809;  the  business  had  been 
overdone.  The  Farmers'  Bank  of  Gloucester,  Rhode  Island, 
when  investigated  by  a  committee  of  the  legislature  was 
found  to  have  in  circulation  $580,000  in  notes,  and  available 
assets  for  their  redemption  to  the  extent  of  $84.67.  Other 
banks  in  New  England  were  no  better. 

The  banks  south  of  New  England  suspended  in  1814.  In 
Philadelphia,  the  notes  of  the  city  banks  depreciated  twenty 
per  cent,  and  those  of  the  country  banks  from  twenty  to  fifty 
per  cent;  fractional  parts  of  a  dollar  were  supplied  by  small 
notes  and  tickets  of  banks,  corporations  and  individuals. 

With  the  exception  of  a  second  United  States  bank  incor- 
porated in  1816  with  a  capital  of  thirty-five  millions,  to  con- 
tinue twenty  years,  and  which  failed  in  1839  with  its  stock  a 
total  loss,  the  State  banks  furnished  the  paper  money  and  con- 
trolled the  currency  of  the  country  until  the  outbreak  of  the 
late  civil  war. 

In  1816,  when  the  bill  to  incorporate  the  second  United 
States  bank  was  pending,  Mr.  Calhoun  said  in  the  House: 
"There  has  been  an  extraordinary  revolution  in  the  currency 
of  the  country.  By  a  sort  of  undercurrent,  the  power  of  Con- 


AMERICAN    MONEY.  117 

9 
gress  to  regulate  the  money  of  the    country  lias  caved  in  and 

upon  its  ruin  has  sprung  up  these  institutions  which  now  exer- 
cise the  right  of  making  money  in  and  for  the  United  States. 
For  gold  and  silver  are  not  the  only  money,  but  whatever  is 
the  medium  of  exchange  and  sale,  in  which  bank  paper  alone 
was  now  employed  and  had  become  the  money  of  the  coun- 
try. A  change  great  and  wonderful  has  taken  place,  which 
divests  you  of  your  rights  and  turns  you  back  to  the  Revolu- 
tionary war,  in  which  every  State  issued  bills  of  credit,  which 
were  made  a  legal  tender  and  were  of  various  values.  We 
have  in  lieu  of  gold  and  silver,  a  paper  medium  unequally  and 
generally  depreciated,which  affects  the  trade  and  industry  of 
the  nation:  which  paralyzes  the  national  arm,  and  which  sul- 
lies the  faith,  both  public  and  private,  of  the  United  States." 

And  he  further  stated  that  the  banks  had  one  hundred  and 
seventy  millions  in  circulation,  and  not  over  fifteen  millions 
in  specie  for  its  redemption. 

Up  to  1816,  the  mint  bad  coined  in  gold  (eagles,  half  and 
quarter  eagles),  and  in  silver,  (dollars,  halves,  quarters,  dimes 
and  half  dimes,  as  follows: 

Gold $  5,610,957.50 

Silver   dollars 1,439,517.00 

Fractional   silver  coins 6,175,111.50 


Total #.  .$13,225,586.00 

Any  other  specie  then  in  the  country  must  have  consisted  of 
foreign  coins. 

The  country  went  into  the  war  of  1812  with  a  currency  con- 
sisting of  State  bank  paper.  Washington  wras  taken  by 
a  small  invading  force  and  the  public  buildings,  including  the 
capitol,  were  burnt,  and  insolvency  compelled  peace  without 
honor,  except  on  the  water  and  finally  at  New  Orleans. 
When  Mr.  Calhoun  said  the  State  bank  paper  had  paralyzed 
the  national  arm,  he  evidently  referred  to  events  then  fresh  in 
the  minds  of  his  hearers. 

Mr.  Benton  says  (Thirty  Years,  etc.,  vol.  1,  p.  1):  "The 
Government  struggled  and  labored  under  the  state  of  the 
finances  and  currency  and  terminated  the  war  without  any 
professed  settlement  of  the  cause  for  which  it  began.  There 
was  no  national  currency — no  money,  or  its  equivalent,  which 
represented  the  same  value  in  all  places.  The  first  Bank  of 


118  AMERICAN    MONEY. 

the  United  States  ceased  to  exist  in  1811.  Gold,  from  being 
undervalued,  had  ceased  to  be  a  currency — had  become  an 
article  of  merchandise,  and  of  export — and  was  carried  to 
foreign  countries.  Silver  had  been  banished  by  the  general 
use  of  bank  notes,  had  been  reduced  to  a  small  quantity  in- 
sufficient for  a  public  demand;  and  besides  would  have  been 
too  cumbrous  for  a  national  currency.  Local  banks  over- 
spread the  land:  and  upon  these  the  federal  government, 
having  lost  the  currency  of  the  constitution,  was  thrown  for 
a  currency  and  for  loans.  They,  unequal  to  the  task,  and  hav- 
ing removed  their  own  foundations  by  banishing  specie  by 
profuse  issues,  sank  under  the  double  load  of  national  and 
local  wants,  and  stopped  specie  payments — all  except  New 
England, which  section  was  unfavorable  to  the  war.  Treasury 
notes  were  then  the  resort  of  the  federal  government.  They 
were  issued  in  great  quantities;  and  riot  being  convertible  into 
coin  at  the  will  of  the  holder,  soon  began  to  depreciate.  In 
the  second  year  of  the  war  the  depreciation  had  become 
enormous,  especially  towards  the  Canada  frontier,  where  the 
war  raged  and  where  money  was  most  wanted.  An  officer 
setting  out  from  Washington  with  a  supply  of  these  notes, 
found  them  sunk  one-third  by  the  time  he  arrived  at  the 
Northern  frontier.  After  all,  the  Treasury  notes  could  not 
be  used  as  a  currency,  neither  legally  nor  in  fact;  they 
could  only  be  used  to  obtain  local  bank  paper,  itself  greatly 
depreciated.  All  government  securities  were  under  par,  even 
for  depreciated  bank  notes.  Loans  were  obtained  with  great 
difficulty,  at  large  discount,  almost  on  the  lender's  own  terms; 
and  still  attainable  only  in  depreciated  local  bank  notes.  Im- 
pressment was  the  object — the  main  one,  with  the  insults  and  the 
outrages  connected  with  it — and  without  which  there  would 
have  been  no  declaration  of  war.  The  treaty  of  peace  did  not 
mention  or  allude  to  the  subject.  *  But  the  glorious  ter- 

mination of  the  war  did  not  cure  the  evil  of  a  ruined  currency 
and  defective  finances,  nor  render  less  impressive  the  financial 
lesson  which  it  taught.  A  return  to  the  currency  of  the  con- 
stitution— to  the  hard  money  government  which  our  fathers 
gave  us — no  connection  with  banks — no  bank  paper  for  federal 
uses — the  establishment  of  an  independent  treasury  for  the 
federal  government;  this  was  the  financial  lesson  which  the 
war  taught." 


AMERICAN  MONET.  119 

But  the  lesson  was  not  heeded.  The  issue  of  State  bank 
paper  went  on;  and  there  was  another  combined  credit  and 
currency  panic  in  1819-20,  followed  by  general  insolvency. 

In  Ex-Gov.  Ford's  History  of  Illinois  it  is  said  that  "  in 
1818  the  whole  people  of  the  State  numbered  about  forty-five 
thousand  souls."  "  Such  a  thing  as  regular  com- 

merce was  nearly  unknown.  Until  1 8 1 7,  e\ ery thing  of  foreign 
growth  or  manufacture  had  been  brought  from  New  Orleans 
in  keel  boats,  towed  with  ropes  or  pushed  with  poles,  by  the 
hardy  race  of  boatmen  of  that  day,  up  the  current  of  the 
Mississippi;  or  else  wagoned  across  the  mountains  from  Phila- 
delphia to  Pittsburg,  and  from  thence  floated  down  the  Ohio 
to  its  mouth  in  keel  boats.  Upon  the  conclusion  of  the  war  of 
1812  the  people  from  the  old  States  began  to  come  in  and 
settle  in  the  country.  They  brought  some  money  and  prop- 
erty with  them,  and  introduced  some  changes  in  the  customs 
and  modes  of  living.  Before  the  war,  such  a  thing  as  money 
was  scarcely  ever  seen  in  the  country,  the  skins  of  the  deer 
and  raccoon  supplying  the  place  of  a  circulating  medium. 
The  money  which  was  now  brought  in,  and  which  had  before 
been  paid  by  the  United  States  to  the  militia  during  the  war, 
turned  the  heads  of  the  people,  and  gave  to  them  new  ideas 
and  aspirations,  so  that  by  1819  the  whole  country  was  in  a 
rage  for  speculating  in  lands  and  town  lots.  The  States  of 
Ohio  and  Kentucky,  a  little  before,  had  each  incorporated  a 
batch  of  about  forty  independent  banks.  The  Illinois  Terri- 
tory had  incorporated  two  at  home,  one  at  Edwardsville  and 
the  other  at  Shawneetown;  and  the  Territory  of  Missouri 
added  two  more  at  St.  Louis.  These  banks  made  money  very 
plenty;  emigrants  brought  it  to  the  State  in  great  abundance. 
The  owners  of  it  had  to  use  it  in  some  way;  and  as  it  could 
not  be  used  in  legitimate  commerce,  the  most  of  it  was  used 
to  build  houses  in  towns  which  the  limited  business  of  the 
country  did  not  require,  and  to  purchase  land  which  the  labor 
of  the  country  was  not  sufficient  to  cultivate.  This  was  called 
"  developing  the  infant  resources  of  a  new  country."  The 
United  States  government  was  then  selling  land  at  two  dollars 
per  acre:  one-fourth  in  cash,  with  a  credit  of  five  years  for  the 
residue.  For  nearly  every  eighty  dollars  in  the  country,  a 
quarter  section  of  land  was  purchased;  and  the  notes  of  most 
of  the  numerous  banks  in  existence  were  good  in  the  public 


120  AMERICAN  MONEY. 

land  offices.  The  amount  of  land  thus  purchased  was  in- 
creased by  the  general  expectation  that  the  rapid  settlement 
of  the  country  would  enable  the  speculator  to  sell  for  a  high 
price  before  the  expiration  of  the  credit.  This  great  abun- 
dance of  money  also  made  a  vast  increase  in  the  amount  of 
merchandise  brought  into  the  State.  When  money  is  plenty, 
every  man's  credit  is  good.  The  people  dealt  largely  with 
the  stores  on  credit,  and  drew  upon  a  certain  fortune  in  pros- 
pect for  payment.  Everyone  was  to  get  rich  out  of  the  future 
emigrant.  The  speculator  was  to  sell  him  houses  and  lands: 
the  farmer  was  to  sell  him  everything  he  wanted  to  begin 
with  and  live  upon  until  he  could  supply  himself.  Towns- 
were  laid  out  all  over  the  country  and  lots  were  purchased  by 
every  one  on  credit;  the  town  maker  received  no  money  for  his 
lots,  but  he  received  notes  of  hand,  which  he  considered  to  be 
good  as  cash:  and  he  lived  and  embarked  in  other  ventures  as 
if  they  had  been  cash  in  truth.  In  this  mode,  by  the  year 
1820,  nearly  the  whole  people  were  irrecoverably  involved  in 
debt.  The  banks  in  Ohio  and  Kentucky  broke,  one  after 
another,  leaving  the  people  of  those  States  covered  with  in- 
debtedness and  without  the  means  of  extrication.  The  banks 
at  home  and  in  St.  Louis  ceased  business.  The  great  tide  of 
emigrants  failed  to  come.  Real  estate  was  unsaleable;  the 
lands  purchased  of  the  United  States  were  unpaid  for  and 
likely  to  be  forfeited.  Bank  notes  had  driven  out  specie,  and 
when  these  notes  became  worthless,  there  was  no  money  of  any 
description  left  in  the  country.  The  people  began  to  sue  one 
another  for  their  debts;  and  as  there  was  absolutely  no  money 
in  the  country,  it  was  evident  that  scarcely  any  amount  of 
property  would  pay  the  indebtedness.  To  remedy  these  evils, 
the  Legislature  of  1821  created  a  State  bank.  It  was  founded 
without  money  and  wholly  on  the  credit  of  the  State.  It 
was  authorized  to  issue  one,  two,  three,  five,  ten,  and  twenty 
dollar  notes  in  likeness  of  bank  bills,  bearing  two  per  cent, 
annual  interest  and  payable  by  the  State  in  ten  years.  It  was 
directed  by  law  to  lend  its  bills  to  the  people  to  the  amount  of 
one  hundred  dollars  on  personal  security;  and  upon  the  secu- 
rity of  mortgages  upon  land  for  a  greater  sum.  These  bills 
were  to  be  receivable  in  payment  of  all  State  and  county 
taxes  and  for  all  costs  and  fees,  and  salaries  of  public  officers: 
and  if  a  creditor  refused  to  endorse  on  his  execution  his  will- 


AMERICAN    MONEY.  121 

ingness  to  receive  them  in  payment  of  the  debt,  the  debtor 
could  stay  its  collection  for  three  years  by  giving  personal 
security.  So  infatuated  were  this  legislature  with  this  absurd 
bank  project,  that  the  members  firmly  believed  that  the  notes 
would  remain  at  par  with  gold  and  silver.  As  an  evidence  of 
this,  the  journals  show  that  a  resolution  was  passed,  request- 
ing the  Secretary  of  the  Treasury  to  receive  these  notes  into 
the  Land  offices  in  payment  for  the  public  lands.  When  this 
resolution  was  put  to  the  vote  in  the  Senate,  the  old  French 
lieutenant  governor,  Col.  Menard,  presiding  over  that  body, 
did  up  the  business  as  follows:  "Gentlemen  of  the  Senate,  it 
is  moved  and  seconded  dat  de  notes  of  dis  bank  be  made  land 
office  money.  All  in  favor  of  dat  motion,  say  aye;  all  against 
it  say  no.  It  is  decided  in  the  affirmative.  And  now  gentle- 
men, I  bet  you  one  hundred  dollar  he  never  be  made  land 
office  money."  In  the  summer  of  1821  the  new  bank  went 
into  operation.  The  directors  were  all  politicians;  and  were 
then,  or  expected  to  be  candidates  for  office.  Lending  to 
everybody,  and  refusing  none,  was  the  surest  road  to  popular- 
ity. Accordingly,  three  hundred  thousand  dollars  of  the  new 
money  was  soon  lent  without  much  attention  to  security  or 
care  for  eventual  payment.  It  first  fell  twenty-five  cents, 
then  fifty  and  then  seventy  cents  below  par.  As  the  bills 
of  the  Ohio  and  Kentucky  banks  had  driven  all  the  money 
out  of  the  State,  so  this  new  issue  effectually  kept  it  out. 
Such  a  total  absence  was  there  of  the  silver  coins,  that 
it  became  utterly  impossible,  in  the  course  of  trade,  to  make 
small  change.  The  people  from  necessity  were  compelled  to 
cut  the  new  bills  into  two  pieces,  so  as  to  make  two  halves  of 
a  dollar.  This  again  further  aided  to  keep  out  even  the 
smallest  silver  coins,  for  the  people  must  know  that  good 
money  is  a  very  proud  thing,  and  will  not  circulate,  stay  or 
go  where  bad  money  is  treated  with  as  much  respect  as  good." 
In  1837  there  was  another  combined  credit  and  currency 
panic,  the  effects  of  which  lasted  for  about  ten  years.  To  take 
the  State  of  Illinois  for  illustration,  the  condition  of  the  State 
in  1842  was  (Ford's  History)  "The  treasury  of  the  State  was 
indebted  for  the  ordinary  expenses  of  government  to  about 
%313,000.  Auditor's  warrants  were  selling  at  fifty  percent, 
discount  and  there  was  no  money  in  the  Treasury  whatever, 
not  even  to  pay  postage  on  letters.  The  treasury  was  bank- 


122  AMERICAN    MONEY. 

nipt.  A  debt  of  fourteen  millions  had  been  contracted  for 
the  canal,  railroads  and  other  purposes.  The  currency  of  the 
State  had  been  annihilated:  there  was  not  over  two  or  three 
hundred  thousand  dollars  in  good  money  in  the  pockets  of  the 
whole  people.  They  were  indebted  to  the  merchants,  nearly 
all  of  whom  were  indebted  to  the  banks  or  to  foreign  mer- 
chants, and  the  banks  owed  everybody  and  none  were  able  to 
pay." 

The  bankrupt  act  of  1841  settled  a  large  part  of  the  debts 
of  the  whole  country. 

State  Bank  money  continually  proved  to  be  a  failure.  It 
rested  upon  no  secure  foundation  and  had  only  a  local  circu- 
lation. It  never  furnished  a  national  currency  equally  good 
throughout  the  whole  country.  When  the  issues  of  a  State 
wandered  too  far  away  from  home  it  sank  to  a  discount  and 
became  uncurrent.  Excessive  issues  crowded  out  and  kept  out 
the  specie,  and  when  confidence  in  the  paper  money  was  lost 
a  currency  panic  was  the  consequence.  Whereupon  there  was 
no  money  and  a  credit  panic  followed  and  everybody  was  in- 
solvent or  bankrupt.  No  State  could  make  its  bank  issues  a 
tender  for  the  payment  of  debts.  Hence  the  resort  to  valua- 
tion, appraisement  and  stay  laws,which  as  to  past  transactions 
were  also  invalid. 

A  United  States  bank  could  furnish  a  national  curre?icv. 
But  it  was  justly  regarded  as  a  huge  monopoly  dangerous  to 
republican  institutions.  The  charter  of  the  first  one  expired 
in  1811  and  was  not  renewed.  The  charter  of  the  second  one 
expired  in  1836  and  became  thereafter  a  State  bank  and  failed 
in  1839.  Its  capital  of  thirty-five  millions  of  dollars  was  a 
total  loss,  of  which  the  United  States  owned  and  lost  one- 
fifth.  The  public  revenue  collected  in  one  district  in  State 
Bank  paper  current  there,  was  not  available  for  expenditure 
elsewhere.  And  in  1840,  Congress  passed  "An  act  to  provide 
for  the  collection,  safe  keeping  and  disbursement  of  the  public 
money,"  and  thereby  divorce  the  National  treasury  from  the 
State  banks.  After  the  election  of  Harrison  and  Tyler  this 
act  was  repealed,  and  an  effort  made  to  establish  a  third 
United  States  bank.  Harrison  having  died,  an  act  passed  for 
the  purpose  met  with  a  veto  from  Mr.  Tyler.  And  this  finally 
ended  the  scheme  of  a  great  national  bank.  In  1846,  another 
act  was  passed  in  Congress  entitled  "  An  act  for  the  better 


AMERICAN    MONEY.  123 

organization  of  the  Treasury,  and  for  the  collection,  safe- 
keeping, transfer,  and  disbursement  of  the  public  revenue." 
By  this  act  it  was  provided  that  on  and  after  January  1,  1847, 
all  duties,  taxes,  sales  of  public  lands,  debts,  and  sums  of 
money  accruing  or  becoming  due  to  the  United  States  should 
be  paid  into  the  Treasury  in  gold  or  silver  or  in  Treasury 
notes  issued  under  the  authority  of  the  United  States;  and 
that  on  and  after  April  1,  1847,  all  payments  were  to  be  made 
in  gold  and  silver,  or  in  Treasury  notes,  if  the  creditor  saw  fit 
to  take  them.  This  closed  the  Treasury  to  bank  notes,  until  the 
creation  of  the  present  national  bank  system  in  1863,  under 
which  the  notes  of  such  banks  are  receivable  for  all  public 
dues  and  demands  due  to  the  United  States,  except  duties  on 
imports.  Upon  any  enlargement  of  that  system,  the  govern- 
ment in  case  of  war,would  find  its  Treasury  encumbered  with 
the  inconvertible  issues  of  these  banks  and  be  reduced  to  a 
condition  similar  to  that  experienced  in  the  war  of  1812, 
The  provision  requiring  a  holder  to  present  the  notes  of  a 
national  bank  in  multiples  of  $1,000  at  the  United  States 
Treasury,  or  otherwise  to  present  the  same  at  the  counter  of 
the  bank  during  business  hours,  and  if  unpaid  to  protest  the 
notes,  make  report  to  the  Comptroller  and  wait  thirty  days 
for  him  to  take  action  in  the  premises  is  similar  to  modes 
adopted  earlier  in  favor  of  State  banks  to  enable  them  to  evade 
payment.  At  one  time  in  Georgia,  one  who  presented  a  bank 
note  for  payment  was  required  to  make  oath  in  the  bank  be- 
fore a  justice  of  the  peace  that  the  note  was  his  own  and  that 
he  was  not  the  agent  of  another,  and  also  make  the  same  oath 
before  the  cashier  and  five  of  the  directors,  at  a  total  cost  of 
$1.37^  on  each  note. 

A  bank  of  issue  lends  its  own  notes  without  interest  for  the 
notes  of  its  customers  bearing  interest.  This  constitutes  its 
profit:  its  notes  are  issued  for  private  gain,  and  not  for  the 
public  benefit.  And  it  is  prompt  to  make  its  debtors  pay  with 
interest  and  costs;  but  it  seeks  to  evade  the  payment  of  its 
own  notes.  It,  therefore,  finds  means  to  scatter  them 
broadcast  and  as  far  away  from  home  as  possible.  If  they 
never  find  their  way  back  so  much  better  for  the  bank.  In 
times  past,  the  bank  which  always  continued  to  pay  its  notes 
on  demand  or  finally  paid  them  in  full  was  the  exception. 
The  present  national  banks  suspended  payment  upon  their  <lt> 


124  AMERICAN   MONEY. 

posits  in  1873.  From  their  inception  until  January  1,  1879, 
they  never  redeemed  their  notes  at  all.  In  1873,  Gen.  Grant, 
then  President,  thought  that  they  ought  to  be  compelled  to 
redeem  their  notes  at  least  in  greenbacks. 

Some  time  after  State  banks  had  monopolized  the  field  of 
circulation,  the  notion  began  to  prevail  that  banking  ought  to 
be  free:  that  instead  of  certain  banks  having  a  monopoly, 
everybody  ought  to  be  allowed  to  issue  paper  money.  In 
1854  a  free  banking  system  adopted  in  Indiana  went  to  pieces 
and  the  holders  of  the  notes  suffered  great  loss. 

In  1857  there  was  another  crisis  and  suspension  of  specie 
payments,  the  effects  of  which  continued  until  the  civil  war  in 
1861. 

In  the  fall  of  1860,  Mr.  Lincoln  was  elected  President,  and 
thereupon  the  Southern  States  attempted  to  secede  from  the 
Union,  and  to  that  end  combined  as  the  Confederate  States 
under  a  provisional  constitution,  February  8,  1861.  At  that 
time  the  banks  of  the  State  of  Illinois,  organized  under  a  free 
banking  system,  had  nearly  twelve  millions  of  dollars  in 
paper  in  circulation,  mostly  secured  by  deposit  of  bonds  is- 
sued by  the  Southern  States.  Secession  destroyed  the  value 
of  these  bonds.  The  banks  were  numerous,  small,  and  gen- 
erally located  in  out  of  the  way  places  with  a  view  to  incon- 
vertibility. The  total  specie  held  by  them  amounted  to  only 
$302, 905.  As  the  bonds  declined  in  value,  so  did  the  money; 
and  the  people  lost  the  greater  part  of  the  face  value  of  the 
notes  and  were  left  without  a  currency.  The  prostration  was 
complete.  Deposits,  if  paid  at  all,  were  worth  little  in  such 
bank  paper.  The  token  theory  of  money,  failed  to  work  in 
this  case.  The  doctrine  that  money  may  be  composed  of 
mere  tokens  or  counters  to  pass  from  hand  to  hand  as  a  me- 
dium of  exchange  seems  to  require  a  general  and  permanent 
delusion  that  the  money  possesses  intrinsic  value,  or  else  the 
bottom  drops  out. 

Mr.  Lincoln,  having  become  President  on  March  4,1861,  on 
April  15,  1861,  issued  a  call  for  seventy-five  thousand  men 
and  also  for  a  special  session  of  Congress,  to  meet  July  4, 
1861.  On  July  17,  1861,  a  loan  of  two  hundred  and  fifty 
millions  was  authorized,  pursuant  to  which  Mr.  Chase,  then 
Secretary  of  the  Treasury,  sold  at  par  one  hundred  millions  of 
Treasury  notes  bearing  seven  and  three-tenths  per  cent,  inter- 


AMERICAX    MONEY.  125 

est,  and  payable  three  years  after  date;  also,  fifty  millons  of 
six  per  cent,  twenty  year  bonds  at  ten  per  cent,  discount,  and 
also  issued  fifty  millions  of  demand  notes  receivable  for  cus- 
toms and  all  public  dues. 

The  battle  of  Bull  Run  was  fought  in  July,  1861,  and  the 
Union  army  defeated.  During  the  summer  the  Union  forces 
were  largely  increased,  and  on  July  22, 1861,  the  President  was 
authorized  to  accept  volunteers  not  exceeding  five  hundred 
thousand  men  to  serve  not  over  three  years.  Thus  vast  ex- 
penditures became  necessary,  and  how  to  meet  them  was  the 
problem. 

Mr.  Chase,  in  his  report  of  December  9,  1861,  said:  The 
circulation  of  the  banks  outside  of  the  rebellious  States  was 
about  one  hundred  and  fifty  millions  of  dollars,  the  whole  of 
which  constituted  a  loan  without  interest  from  the  people  to 
the  banks,  costing  them  nothing  except  the  expense  of  issue 
and  redemption,  and  the  interest  on  the  specie  kept  on  hand  for 
the  latter  purpose;  that  the  value  of  the  existing  bank  circula- 
tion depended  upon  the  laws  of  thirty-four  States  and  the 
character  of  some  sixteen  hundred  private  corporations  and 
was  actually  furnished  in  greatest  proportions  by  institutions 
of  the  least  capital;  that  under  such  a  system,  or  lack  of  sys- 
tem, great  fluctuations  and  heavy  losses  in  discounts  and 
exchanges  were  inevitable  and  not  infrequently  through  failure 
of  the  issuing  institutions  considerable  portions  of  the  circu- 
lation became  suddenly  worthless  in  the  hands  of  the  people. 
And  he  thought,  Congress  under  the  power  to  tax,  regulate 
commerce,  <fec.,  possessed  ample  authority  to  control  the  credit 
circulation,  which  enters  BO  largely  into  the  transactions  of 
commerce  and  affects  in  so  many  wrays  the  value  of  coin,  and 
that  in  his  judgment,  the  time  had  arrived  when  Congress 
should  exercise  this  authority.  And  he  proposed  two  plans: 
one  for  the  gradual  withdrawal  from  circulation  of  the  notes 
of  private  corporations,  and  the  issue,  in  their  stead,  of 
United  States  notes,  payable  in  coin  on  demand,  in  amounts 
sufficient  for  the  useful  ends  of  a  representative  currency;  the 
other,  to  prepare  and  deliver  to  institutions  and  associations, 
notes  prepared  for  circulation  under  national  direction  and  to 
be  secured  as  to  prompt  convertibility  into  coin  by  the  pledge 
of  United  States  bonds  and  other  needful  regulations.  He 
said  that  the  first  plan  had  been  already  partially  adopted  by 


126  AMERICAN    MONEY. 

the  issue  of  demand  notes;  that  it  might  be  extended  so  as  to 
reach  the  average  circulation  of  the  country  while  a  moderate 
tax,  gradually  augmented,  on  bank  notes  would  relieve  the 
national  from  the  competition  of  local  circulation;  that  the 
substitution  of  a  national  for  a  State  currency  upon  this  plan, 
would  be  equivalent  to  a  loan  to  the  Government  without  in- 
terest, except  on  the  fund  to  be  kept  in  coin,  and  without  ex- 
pense, except  the  cost  of  preparation,  issue  and  redemption; 
while  the  people  would  gain  the  additional  advantage  of  a 
uniform  currency  and  a  relief  from  a  considerable  burden  in 
the  form  of  interest  on  debt. 

The  principal  features  of  the  second  plan  were:  a  circulation 
of  notes  bearing  a  common  impression  and  authenticated  by 
a  common  authority;  the  redemption  of  these  notes  by  the 
associations  and  institutions  to  which  they  may  be  delivered 
for  issue;  and  the  security  of  that  redemption  by  the  pledge 
of  United  States  stocks  and  an  adequate  provision  of  specie. 
In  this  plan,  the  people,  in  their  ordinary  business,  would  find 
the  advantages  of  uniformity  in  currency  and  security,  of  ef- 
fectual safeguard,  if  the  same  is  possible,  against  depreciation; 
and  of  protection  from  losses  in  discounts  and  exchanges. 
While  in  the  operations  of  the  Government  the  people  would 
find  the  further  advantages  of  a  large  demand  for  government 
securities,  of  increased  facilities  for  obtaining  the  loans  re- 
quired by  the  war,  and  of  some  alleviation  of  the  burdens  on 
industry  through  a  diminution  in  the  rate  of  interest,  or  a 
participation  in  the  profits  of  circulation,  without  risking  the 
perils  of  a  great  money  monopoly. 

And  he  favored  the  latter  plan,  because  it  would  avoid  the 
evils  of  a  great  and  sudden  change  in  the  currency  by  offering- 
inducements  to  solvent  existing  institutions  to  withdraw  the 
circulation  issued  under  State  authority  and  substitute  that 
provided  by  the  authority  of  the  Union.  And  thus  through 
the  voluntary  action  of  the  existing  institutions,  aided  by  wise- 
legislation,  the  great  transition  from  a  currency  heterogeneous, 
unequal,  and  unsafe,  to  one  uniform,  equal,  and  safe  might  be 
speedily  and  almost  imperceptibly  accomplished. 

And  he  thought  no  argument  was  necessary  to  establish 
that  the  power  to  regulate  commerce  and  the  value  of  coin 
included  the  power  to  regulate  the  currency  of  the  country  or 
the  collateral  proposition  that  the  power  to  effect  the  end  in-' 


AMERICAN    MONEY.  127 

eludes   the    power  to    adopt    the    necessary   and   expedient 
means. 

When  a  hard  money,  man  and  a  strict  construction! st  saw 
the  integrity  of  the  Union  menaced  by  a  rebellion  of  colossal 
magnitude,  his  loyalty  enabled  him  to  perceive  powers  in  the 
constitution  not  clearly  seen  before.  In  his  opinion  also,  the 
time  had  arrived  to  put  an  end  to  an  heterogeneous,  unequal 
and  unsafe  currency  composed  of  bank  notes  issued  under 
State  authority  and  to  adopt  a  national  currency.  The  State 
bank  paper  which,  in  the  war  of  1812,  had  "paralyzed  the 
national  arm  and  sullied  the  faith,  both  public  and  private,  of 
the  United  States"  had  lived  long  enough.  In  the  crisis  of 
1861,  the  men  at  the  helm  did  not  intend  to  allow  the  national 
cause  to  be  swamped  by  State  bank  money. 

On  December  31,  1861,  all  the  banks  in  the  country,  still 
solvent,  suspended  specie  payments,  and  the  United  States 
Treasury  followed  suit.  And  thus  the  idea  of  United  States 
notes  "  payable  in  coin  on  demand  "  and  National  bank  notes 
"secured  as  to  prompt  convertibility  into  coin"  passed,  as  to  the 
coin  part  of  it,  into  limbo.  The  specie  in  the  country  hardly 
sufficed  to  pay  duties  on  imports.  The  fight  had  to  be  made 
on  credit.  It  was  difficult  to  pay  interest  in  specie  where  the 
public  securities  required  it. 

The  Secretary  proposed  to  nationalize  the  currency;  the 
whole  State  bank  system  being  in  favor  of  State  rights,  was 
opposed  to  it,  and  they  were  violently  opposed  to  all  irredeem- 
able paper  money  except  their  own.  The  offer  of  the  national 
bank  system  under  national  control  failed  to  placate  banks 
whose  issues  were  under  less  control. 

The  confederate  banks  of  Boston,  New  York,  and  Phila- 
delphia, as  champions  of  State  rights,  and  representatives  of 
a  mob  of  broken  and  suspended  State  banks,  sent  a  powerful 
lobby  to  Washington  to  oppose  the  schemes  of  the  Secretary. 
Their  plan  was,  no  legal  tender  notes  and  no  more  demand 
notes;  the  government  to  become  one  of  their  customers  and 
keep  its  deposits  with  them,  checking  out  the  money  as  occa- 
sion might  require;  bonds  to  be  issued  and  sold  for  whatever 
they  might  bring,with  power  in  the  Secretary  to  hypothecate 
bonds  as  security  for  loans  which,  if  not  paid  at  maturity,  the 
bonds  might  be  sold  to  the  highest  bidder.  All  the  banks  in 
the  States  of  Massachusetts,  New  York  and  Pennsylvania  then 


128  AMERICAN    MONEY. 

had  a  circulation  of  about  sixty-six  millions  of  dollars,  and 
this  the}-  could  not  redeem.  Yet  these  petty  banks  proposed 
to  reduce  the  Government  in  such  an  emergency  to  the  condi- 
tion of  a  beggar  at  their  doors.  The  public  debt  on  Decem- 
ber 1,  1861,  was  about  two  hundred  and  sixty-seven  millions; 
on  October  31,  1865,  it  was  $2,8o8,545,437.55.  Victory  had 
been  won  by  the  fore  part  of  May,  1 865,  at  which  time  there 
was  a  navy  of  530  vessels  of  all  kinds,  armed  with  3,000  guns 
and  manned  by  51,000  men,  and  an  army  of  1,000,516  men- 
All  of  these  were  paid  off  and  mostly  discharged  by  October 
31,  1865.  In  view  of  these  figures,  the  impudence  of  these 
^mall  State  banks  was  gigantic.  Their  plan  failed  and  their 
officers  went  home,  not  to  pay  their  suspended  paper,  but  to  in- 
flate it.  These  banks  never  resumed  specie  payments. 

Necessity  compelled  the  Government  to  emit  bills  of  credit 
in  the  form  of  Treasury  notes  during  the  war  of  1812.  They 
were  not  in  a  form  suited  to  circulate  as  money;  but  were 
receivable  for  all  public  dues,were  fundable  into  public  stock, 
iind  generally  bore  interest.  A  promise  to  pay  money  to  A 
or  order  after  a  time  limited  or  on  demand  with  interest,  was 
thought  to  be  quite  as. lawful  and  valid  as  any  part  of  the 
I'M mded  debt.  And  finally  it  was  seen  that  a  promise  to  pay 
the  bearer  a  certain  sum  on  demand  without  interest,  was 
equally  valid.  This  left  but  one  more  step,  and  that  was  to 
make  the  Treasury  note  lawful  money  and  a  legal  tender. 
This  was  done  in  the  greenback  and  the  power  to  do  it  was 
found  in  the  constitution  by  the  Supreme  Court,  as  chiefly 
implied  in  the  power  to  borrow  money;  so  that  the  National 
Government  now  carries  both  the  purse  and  the  sword. 

Although  Mr.  Chase  favored  his  National  bank  scheme,  the 
logic  of  events  compelled  the  issue  of  United  States  notes. 
The  first  issue  of  one  hundred  and  flfty  millions  wras  author- 
ized February  25, 1862.  At  this  time,  United  States  6  per  cent, 
bonds  were  selling  at  twelve  per  cent,  discount  in  suspended 
bank  paper.  The  greenback  is  a  promise  to  pay  dollars  with- 
out saying  when.  At  the  time  of  its  issue  it  meant  payment 
in  specie  when  the  Government  was  able;  and  the  people 
made  it  able.  Ever  since  January  1,  1879,  it  has  meant  pay- 
ment in  gold  on  demand  with  every  facility  offered  to  get  the 
<-oin.  The  total  amount  authorized,  was  four  hundred  and 
iifty  millions,  and  part  of  this  was  in  lieu  of  the  demand  notes 
and  a  part  used  as  a  reserve  to  pay  temporary  loans. 


AMERICAN    MONEY.  129 

The  State  banks  again  appear  in  the  Treasury  reports.  Mr, 
Fessenden,  then  Secretary,  in  his  report  of  December  6,  1864, 
says:  The  necessities  of  former  years  have  led  to  many  ex- 
pedients, as  is  apparent  from  the  diversity  of  forms  which 
our  securities  present.  As  the  debt  increases  from  year  to 
year  borrowing  becomes  more  difficult,  embarrassed  as  the 
country  is  with  two  systems  of  banking  and  obstructed  as  the 
Government  is  by  a  currency  wholly  beyond  its  control,  it  is- 
manifest  that  to  push  its  own  circulation  far,  if  at  all,  beyond 
its  present  limit  could  only  be  justified  by  extreme  necessity. 
He  says  also,  the  returns  on  file  show  that  the  whole  circula- 
tion of  the  State  banks  on  January  1,  1864,  was  $169,916,129. 
The  total  amount  issued  to  National  banks  to  November  22, 
1864,  was  $65,160,210.  The  diminution  of  State  bank  issues 
deducted  from  the  National  bank  issues  left  an  increase  of 
over  twenty-one  millions  of  dollars  in  bank  circulation  during 
the  year.  And  after  stating  his  necessities  he  further  says: 
Under  these  circumstances,  the  Secretary  thought  it  advisable 
in  order  to  meet  pressing  emergencies  to  borrow  upon  bonds 
or  notes  authorized  by  the  different  acts  referred  to,  fifty  mil- 
lions of  dollars  of  the  banks  of  the  cities  of  New  York, 
Philadelphia  and  Boston,  and  met  the  representatives  of  a 
large  number  of  there  institutions  in  New  York.  The  result 
proved,  however,  that  notwithstanding  a  professed,  and  as  the 
Secretary  was  convinced,  a  reasonable  desire  to  aid  the  Gov- 
ernment, these  institutions  were  not  able  to  furnish  the  as- 
sistance required  upon  any  terms  which  under  existing  pro- 
visions of  law  the  Secretary  felt  authorized  to  accept. 

These  were  the  banks  who  felt  able  to  manage  the  whole 
war  debt.  They  had  inflated  their  suspended  paper  and  yet 
were  unable  to  take  a  loan  of  fifty  millions  on  any  lawful  terms. 
At  that  time  the  State  and  National  banks  were  reaping  a  profit 
on  their  circulation  of  not  less  than  fourteen  millions  of  dol- 
lars annually.  It  was  crowding  to  the  wall  the  Treasury 
issues.  It  Avas  choking  the  channels  of  circulation  to  the 
prejudice  of  the  National  cause.  Every  artifice  had  been  used 
to  keep  down  inflation  by  the  issue  of  interest  bearing  paper, 
such  as  7.bO  notes,  six  per  cent,  compound  interest  notes,  cer- 
tificates for  temporary  loans  and  certificates  of  indebtedness 
bearing  six  per  cent,  interest.  The  times  were  critical.  Sher- 
man was  fighting  Johnson  among  the  mountains  of  Georgia. 


130  AMERICAN    MONET. 

Grant  was  fighting.  Lee  on  the  road  to  Richmond.  Gold  in 
July,  1864,was  $2.85;  this  price  indicated  great  inflation  and 
portended  impending  collapse.  Now  it  is  plain,  that  if  the 
suspended  bank  paper  then  in  circulation  had  not  existed,  its 
place  could  have  been  occupied  by  the  United  States  notes 
and  the  inflation  would  have  been  no  greater.  This  would 
have  put  into  the  Treasury  about  two  hundred  millions  of  ad- 
ditional funds,  and  that  too  bearing  no  interest.  The  inflated 
and  suspended  bank  note  paper  imperilled  the  national  cause 
On  September  1,  1864,  Sherman  took  Atlanta.  The  back  of 
the  rebellion  was  broken  none  too  soon.  The  nation  was 
fighting  for  life  and  was  forced  to  fight  on  credit  and  pay 
high  rates  of  interest.  At  the  same  time,  these  suspended 
banks  were  stuffing  the  volume  of  the  currency  with  their  ir- 
redeemable paper  for  private  gain.  Any  bank  can  suspend 
payment  when  its  interest  requires  it  and  fee]  no  shame;  but 
it  required  the  cheek  of  Judas  to  do  it  and  also  inflate  in  a 
great  national  crisis  involving  the  country's  fate. 

According  to  the  report  of  the  Secretary  of  the  Treasury 
for  1889,  the  bank  note  circulation  on  June  30,  of  each  year 
during  the  war  was  as  follows:  State  banks,  in  1862,1183,- 
792,079;  in  1863,  $238,677,218;  in  1864,  $179,157,717;  in  1865, 
$142,919,638.  Of  National  banks,  in  1864,  §31,235,270;  in 

1865,  $146,137,860. 

The  National  banks  were  an  injury  instead  of  a  benefit. 
The  bonds  required  to  start  them  soon  reappeared  in  the  cir- 
culation as  paper  money.  None  existed  until  1864.  The 
people  took  the  first  five  hundred  million  loan  of  six  per  cent, 
bonds  in  the  summer  of  1863  at  par  in  paper,  equivalent  to 
nearly  seventy-two  cents  in  gold.  This  National  bank  paper 
Avhich,  according  to  the  original  scheme  of  Mr.  Chase,  was  to 
be  "secured  as  to  prompt  convertibility  into  coin  by  the 
pledge  of  United  States  bonds  and  other  needful  regulations," 
was  convertible  into  nothing,  unless  greenbacks.  These  banks, 
assisted  the  State  banks  in  stuffing  the  volume  of  the  cur- 
rency and  depreciating  the  value  of  the  United  States  notes. 

The  State  bank  system  lived  through  the  war  as  a  fungus 
and  parasite.  A  part  were  finally  induced  to  change  over  to 
the  National  bank  system  and  the  remainder  were  taxed  out 
of  existence  by  a  tax  sufficient  for  the  purpose  first  levied  in 

1866.  The  act  of  July  13,  1866,  provided  that  every  National 


AMERICAN    MONEY.  131 

banking  association,  State  bank  „  or  State  banking  association 
shall  pay  a  tax  of  ten  per  centum  on  the  amount  of  notes  of 
any  person,  State  bank,  or  State  banking  association  used  for 
circulation  and  paid  out  by  them  after  the  first  day  of  August, 
1866.  This  act  was  held  valid  upon  the  ground  that  it  was 
not  a  direct  tax  in  the  sense  in  which  those  words  are  used  in 
the  constitution.  Veazie  Bank  vs.  Fenno,  Collector,  8  Wall. 
533.  And  this  act,  enlarged  so  as  to  include  all  notes  of  any 
town,  city  or  municipal  corporation  issued  for  circulation,  is 
still  in  force,  and  is  all  that  stands  in  the  way  of  local  issues 
everywhere  by  persons  and  corporations  acting  under  State 
authority.  And  a  clause  for  the  repeal  of  this  act  is  said  to 
be  inserted  in  some  political  platforms. 

In  the  above  case,  decided  at  the  December  term,  1869,  Mr. 
Chase,  then  Chief  Justice,  said:  "It  cannot  be  doubted  that 
under  the  constitution  the  power  to  provide  a  circulation  of 
coin  is  given  to  Congress.  And  it  is  settled  by  the  uniform 
practice  of  the  Government  and  by  repeated  decisions,  that 
Congress  may  constitutionally  authorize  the  emission  of  bills 
of  credit.  It  is  not  important  here  to  decide  whether  the 
quality  of  legal  tender  in  payment  of  debts  can  be  constitu- 
tionally imparted  to  these  bills  (since  held  that  it  could):  it 
is  enough  to  say  that  there  can  be  no  question  of  the  power  of 
the  Government  to  emit  them,  to  make  them  receivable  in 
payment  of  debts  to  itself,  to  fit  them  for  use  by  those  who 
see  fit  to  use  them  in  all  the  transactions  of  commerce,  to  pro- 
vide for  their  redemption,  to  make  them  a  currency  uniform 
in  value  and  description  and  convenient  and  useful  for  circu- 
lation. These  powers  until  recently  were  only  partially  and 
occasionally  exercised.  Lately,  however,  they  have  been 
called  into  full  activity,  and  Congress  has  undertaken  to  sup- 
ply a  currency  for  the  entire  country." 

"  Having  thus,  in  the  exercise  of 

undisputed  constitutional  powers, undertaken  to  provide  a  cur- 
rency for  the  whole  country,  it  cannot  be  questioned  that 
Congress  may  constitutionally  secure  the  benefit  of  it  to  the 
people  by  appropriate  legislation.  To  this  end,  Congress  has 
denied  the  quality  of  legal  tender  to  foreign  coins,  and  has 
provided  by  law  against  the  imposition  of  counterfeit  and 
base  coin  on  the  community.  To  the  same  end  Congress  may 
restrain  by  suitable  enactments  the  circulation  as  money  of 


132  AMERICAN    MONEY. 

any  notes  not  issued  under  its  authority.  Without  this 
power,  indeed,  its  attempts  to  secure  a  sound  and  uniform 
currency  for  the  country  must  be  futile." 

In  his  report  in  1861,  as  Secretary  of  the  Treasury,  Mr. 
Chase  said:  "It  has  been  well  questioned  by  the  most  eminent 
statesmen  whether  a  currency  of  bank  notes,  issued  by  local 
institutions  under  State  laws,  is  not,  in  fact,  prohibited  by  the 
National  constitution.  Such  emissions  certainly  fall  within 
the  spirit,  if  not  within  the  letter,  of  the  constitutional  pro 
hibition  of  the  emission  of  '  bills  of  credit '  by  the  States, 
and  of  the  making  by  them  of  anything  except  gold  and  sil- 
ver coin  a  legal  tender  in  payment  of  debts."  The  power  to 
regulate  the  value  of  money  requires  control  over  the  volume 
of  the  currency  as  well  as  over  the  standard  or  money  unit. 
And  since  it  is  now  settled  that  Congress  has  the  power  to 
provide  a  currency,  of  both  coin  and  paper,  for  the  whole 
country,  it  perhaps  remains  for  some  future  Supreme  Court  to 
reverse  the  doctrine  that  bank  bills  or  other  paper  money 
issued  under  State  authority  are  not  bills  of  credit  in  a 
constitutional  sense.  If  silver  had  been  as  abundant  and 
cheap  at  the  adoption  of  the  Federal  constitution  arid  after- 
wards as  it  was  before  the  passage  of  the  recent  act  for  the 
purchase  of  silver,  perhaps  no  such  absurd  doctrine  would  ever 
have  obtained  any  foothold.  But  in  those  days  a  bank  meant 
a  paper  mill,  and  the  people  were  poor  and  destitute  of  both 
gold  and  silver,  and  having  nothing  else  out  of  which  to 
make  money,  they  made  it  out  of  paper.  And  the  right  to 
issue  paper  money  both  as  to  State  banks  and  a  National  bank 
being  established,  the  profit  to  be  realized  out  of  the  issue  of 
paper  money  induced  every  State  to  enter  into  competition  in 
cramming  the  volume  of  the  currency  with  the  notes  of  insti- 
tutions so  located  and  distributed  as  to  prevent  as  far  as  pos- 
sible any  demand  for  specie  upon  the  notes.  By  this  means 
the  specie  was  continually  driven  out,  and  the  inflation  being 
overdone,  there  would  be  a  collapse,  hard  times,  general  in- 
solvency and  no  money.  No  State  could  make  its  paper 
money  a  legal  tender:  therefore,  when  all  devices  to  evade 
payment  of  the  notes  had  been  exhausted  and  specie  had 
risen  to  a  premium  general  distrust  took  the  place  of  confi- 
dence and  a  combined  currency  and  credit  panic  became  a 
financial  cyclone  which  swept  everything  before  it  and  left 
nothing  but  ruin  and  poverty  behind. 


AMERICAN    MONEY.  133 

The  value  of  money  could  n6t  be  regulated  by  Congress 
while  every  State  was  allowed  to  authorize  persons  and  cor- 
porations to  inflate  the  currency  with  paper  money  without 
restraint.  The  relation  between  the  standard  and  the  volume 
of  the  currency,  and  the  importance  of  the  kind  of  money 
and  the  quantity,  were  not  perceived,  or  if  so,  were  entirely 
disregarded.  And  the  wealth  accumulated  during  prosperity 
was  continually  swept  away  by  subsequent  adversity  caused 
by  bank  failures  and  general. financial  collapse.  The  power  to- 
regulate  money  and  its  value  is  one  of  the  most  important 
functions  of  government.  "  There  is  no  contract,  public  or 
private,  no  engagement,  national  or  individual,  which  is  unaf- 
fected by  it.  The  enterprises  of  commerce,  the  profits  of 
trade,  the  arrangements  made  in  all  the  domestic  relations  of 
society,  the  wages  of  labor,  pecuniary  transactions  of  the 
highest  and  the  lowest,  the  payment  of  the  National  debt, 
the  provision  for  the  national  expenditure,  the  command  which 
the  coin  of  the  smallest  denomination  has  over  the  necessaries 
of  life,  are  all  affected  by  it." 

The  great  rebellion  compelled  the  national  authority  to  as- 
sume control  of  the  currency  and  finally  exercise  its  power  to 
regulate  the  value  of  money!  This  has  led  to  a  much  better 
system  than  ever  existed  before. 

The  National  free  banking  system  is  better  than  the  State 
bank  system  which  preceded  it.  But  any  reasons  which  may 
have  existed  in  time  past  for  bank  notes  have  ceased  to  exist. 
The  power  of  the  people  to  provide  themselves  with  a  cur- 
rency directly  issued  out  of  the  National  treasury  has  become 
fully  established.  And  the  delegation  of  the  power  to  regu- 
late the  value  of  money  to  banks  of  issue,  free  or  otherwise, 
is  not  justifiable  under  National  or  State  authority.  No  per- 
son or  corporation  ought  to  be  permitted  by  issues  of  paper 
money  to  tamper  with  the  currency  and  dilute  it  for  private 
gain  and  public  loss.  Banks  of  issue  and  bogus  mints  should 
be  alike  prohibited.  Even  if  banks  could  supply  the  legiti- 
mate demand  for  paper  money,  and  never  abuse  the  trust, 
there  is  no  more  reason  for  delegating  that  function  of  gov- 
ernment to  private  individuals  than  any  other  one  vested  in 
the  State  for  the  public  benefit.  Experience  proves  that  its 
delegation  has  caused  periodical  calamity  to  the  country. 
Furthermore,  all  profit  on  the  use  of  paper  money  belongs  to 


134  AMERICAN    MONEY. 

the  people;  and  it  is  as  great  a  fraud  upon  them  to  grant  it 
away  to  private  individuals  and  corporations  as  to  vote  to  them 
annually,  millions  of  dollars  out  of  the  public  treasury  as  a 
mere  gratuity. 

The  proper  office  and  function  of  a  bank  is  to  reduce  the 
circulation,  and  not  increase  it.  There  are  certain  things 
which  relieve  money  from  work,  such  as  checks,  bills  of  ex- 
change, book  accounts,  promissory  notes,  etc.  These,  com 
biued  with  the  effects  of  steam  and  electricity,  reduce  the 
amount  of  money  which  would  be  otherwise  required.  Now 
in  applying  all  the  facilities  for  doing  business  which  have 
been,  or  may  be,  invented,  a  bank  finds  its  proper  place.  It 
receives  deposits  payable  on  demand;  and  there  is  a  book  ac- 
count between  the  depositor  and  the  bank.  Any  one  who  has 
bills  or  notes  discounted,  is  paid  in  a  book  account  also.  All 
the  customers  leave  their  money  with  the  bank,  and  from 
time  to  time,  as  occasion  may  require,  pay  their  debts  by 
checks.  The  payees  deposit  them  in  the  same  or  some  other 
bank.  Thus  taking  all  the  banks  of  a  city  as  one  concern 
very  little  money  in  fact  passes.  The  great  mass  of  transac- 
tions are  settled  through  a  clearing  house,  by  an  adjustment 
of  mutual  accounts.  A  further  extension  of  this  method 
makes  great  financial  centers  clearing  houses  for  great  dis- 
tricts of  country:  New  York  being  the  chief  centre  for  this 
country,  and  London  for  the  British  Empire  and  indeed  for 
the  whole  world.  The  average  daily  clearings  in  New  York 
during  1889  were  $1 14,839,820  upon  which  balances  paid  in 
money  were  only  five  per  cent.  The  exchanges  through  the 
clearing  houses  of  the  United  States  for  the  year  ending 
September  30,  1889,was  954,494,754,586,  of  which  about  8 
per  cent,  was  paid  in  money.  As  compared  with  the  sum 
total  of  transactions,  the  amount  of  money  moved  is  re- 
duced by  the  agency  of  banks  to  a  mere  nominal  sum. 

Bank  deposits,  other  than  savings,  are  payable  on  demand, 
and  in  ordinary  times  a  large  part  of  such  deposits  can  be 
safely  used  in  discounting  time  paper.  But  in  a  credit  panic 
and  a  run  on  such  a  bank  by  its  depositors  it  would  be  com- 
pelled to  suspend,  although  entirely  solvent.  Somebody 
would  be  compelled  to  wait  until  the  bank  could  realize  upon 
its  investments.  This  it  could  do  in  a  reasonably  short  time, 
if  the  money  were  good,  for  somebody  would  have  it.  But  if 


AMERICAN    MONEY.  135 

the  currency  were  bank  paper,  than  a  bank  of  issue  would  re- 
quire means  sufficient  to  redeem  its  notes  as  well  as  to  pay  its 
depositors.  If  the  money  itself  were  not  beyond  the  reach 
of  distrust,  then  a  panic  could  culminate  into  a  fright  about 
the  money  itself  (a  currency  panic),  as  well  as  a  fear  that  it 
might  not  be  forthcoming  in  payment  of  depositors  and  other 
debts  (a  credit  panic). 

Formerly  the  people  were  kept  too  poor  by  panics  and  re- 
vulsions to  have  any  large  sums  of  money,  and  banks 
were  too  much  distrusted  to  obtain  any  large  amount  of  de- 
posits. Therefore,  they  relied  upon  their  issue  of  bank  notes 
as  their  principal  source  of  profit.  The  Second  Bank  of  the 
United  States,when  it  was  at  its  highest  point  of  confidence, 
and  with  a  capital  of  thirty-five  millions  of  dollars  had  on 
November  1,  1834,  notes  in  circulation  to  the  amount  of  $15,- 
968,731. 90  and  private  deposits  to  the  amount  of  only  $6,741,- 
752.24.  After  it  had  ceased  to  be  a  United  States  bank  and 
was  operating  under  a  State  charter,  but  still  retaining  its 
original  capital,  it  had  notes  in  circulation  to  the  amount  $36,- 
620,420  and  deposits  to  the  amount  of  $2,194,231.  In  con- 
trast with  this  bank  and  its  many  branches,  take  one  National 
bank.  According  to  the  report  of  the  Comptroller  of  the 
Currency  for  1889,  the  Fourth  National  Bank  of  New  York, 
with  a  capital  of  $3,200,000  and  a  circulation  of  $180,000,  had 
$24,745,989.83  in  deposits.  And  according  to  the  same  re- 
port, State  banks  with  no  circulation  had  individual  deposits 
to  the  amount  of  $473,484,147.  In  England,  a  bank  was 
originally  a  bank  of  issue,  and  such  is  the  Bank  of  England 
now;  and  it  is  continually  see-sawing  with  its  issues,  as  gold 
is  exported  or  imported,  and  it  has  been  compelled  to  suspend 
three  times  since  its  reorganization  in  ]844,  which  was  in- 
tended to  make  it  a  financial  Gibralter.  If  declares  dividends 
of  some  six  or  seven  per  cent,  per  annum,while  sundry  deposit 
banks  in  London  declare  dividends  two  or  three  times  as 
great. 

The  true  bank  of  this  day  desires  no  circulation  of  its  own, 
nor  any  bank  issues  at  all.  It  needs  the  soundest  currency 
possible.  Then,  if  well  conducted,  it  acquires  a  great  credit 
and  its  fortune  is  made.  Its  deposits  furnish  it  with  an 
ample  source  of  revenue.  The  bank  of  issue  which  expects 
to  make  its  living  by  tampering  with  the  currency  and  bor- 


136  AMERICAN   MONEY. 

rowing  money  from  the  public  without  interest  upon  its  notes 
has  no  right  to  exist. 

The  average  circulation  of  the  State  and  National  banks 
from  1862  to  1890  was  over  three  bundled  millions  of  dollars. 
If  they  had  not  existed  and  their  place  had  been  supplied 
with  United  States  notes,  the  paper  inflation  would  have  been 
no  greater  during  the  war  and  the  resumption  of  specie  pay- 
ments afterwards  would  have  been  quite  as  easy.  The  limit 
of  inflation  which  a  suspended  paper  currency  will  bear  was 
being  rapidly  approached  in  1864;  and  it  is  quite  evident  that 
the  risk  of  financial  collapse  would  have  been  less  if  the  sus- 
pended issues  of  the  State  banks  had  been  taxed  out  of  ex- 
istence immediately  after  1861  and  no  National  bank  notes 
had  ever  been  issued.  By  using  the  above  additional  amount 
of  their  own  notes  as  money  during  the  above  period,  instead 
of  bank  notes,  the  people  would  have  saved,  counting  interest 
at  four  per  cent,  per  annum,  payable  quarterly  and  com- 
pounded, over  five  hundred  and  seventy- five  millions  of  dol- 
lars. But  the  Secretary  of  the  Treasury  in  1861  feared  the 
hostility  of  the  State  banks  and  hoped  in  vain  to  propitiate 
them  by  an  offer  of  the  national  free  banking  system:  and  his 
hope  was  equally  vain  to  conduct  a  war  of  such  great  magni- 
tude upon  a  cash  basis  with  a  quite  nominal  amount  of 
specie.  The  suspension  of  specie  payments  shortly  after  the 
date  of  his  report,  and  which  continued  for  eighteen  year>, 
left  the  money  question  in  this  form,  Shall  the  war  be  con- 
ducted on  suspended  bank  notes,  or  United  States  notes,  or  of 
the  two  combined?  and  the  latter  was  the  one  adopted,  with 
the  result  that  the  bank  issues  proved  to  be  an  incubus  which 
had  to  be  carried  ever  afterwards.  In  the  war  of  1812  bank 
notes  "paralyzed  the  national  arm  and  sullied  the  faitrr,  both 
public  and  private  of  the  United  States."  In  the  great  re- 
bellion, suspended  bank  notes  carrit  d  the  currency  well  on 
toward>  the  point  of  a  total  financial  collapse  and  hazarded 
the  safety  and  perpetuity  of  the  Union. 

The  friends  of  State  bank  paper  always  favored  a  strict 
construction  of  the  constitution  and  abhorred  a  United  States 
bank  with  branches  or  in  any  form.  But  the  civil  Avar  over- 
threw State  rights  as  represented  by  paper  money  issued  under 
State  authority,  and  developed  the  fact  that  it  could  be  law- 
fully taxed  out  of  existence.  Both  of  these  paper  money 


AMERICAN    MONKEY,  137 

schemes  died  hard.  It  is  to  be  hoped  that  the  present  Na- 
tional banking  system  is  in  the  throes  of  a  final  dissolution, 
as  the  last  representative  of  paper  money  issued  for  private 
gain. 

At  the  end  of  the  war  Mr.  MeCulloch  was  Secretary  of  the 
Treasury:  lie  was  a  great  friend  of  banks  and  hated  a 
greenback  as  much  as  a  friend  of  State  bank  paper  ever  hated 
a  United  States  bank  note  He  had  previously  been  con- 
nected with  the  State  bank  of  Indiana,  which  could  by  its 
charter  issue  several  dollars  in  paper  for  one  of  specie  in  its 
vaults  (actually  or  theoretically).  And  he  had  opposed  the 
National  bank  system;  but  being  made  Comptroller  of  the 
Currency  he  became  its  promoter.  Afterwards  as  Secretary 
of  the  Treasury,  in  his  report  of  December  4,  1865,  he  said: 
The  reasons  sometimes  urged  in  favor  of  United  States  notes 
as  a  permanent  currency  are  the  saving  of  interest  and  their 
perfect  safety  and  uniform  value.  The  objections  to  such  a 
policy  are  that  the  paper  circulation  of  the  country  should  be 
flexible,  increasing  and  decreasing  according  to  the  require- 
ments of  legitimate  business,while  if  furnished  by  the  govern- 
ment it  would  be  quite  likely  to  be  governed  by  the  necessities 
of  the  Treasury  or  the  interests  of  parties  rather  than  the  de- 
mands of  commerce  and  trade.  And  he  was  urgent  to  have 
power  given  to  him  to  sell  six  per  cent,  bonds  for  the  purpose 
of  retiring  the  greenbacks  and  was  in  fact  authorized  to  retire 
ten  millions  within  six  months  ending  October  12,  1866,  and 
thereafter,  at  the  rate  of  four  millions  per  month.  At  this 
same  time  there  was  interest-bearing  paper  outstanding,  all 
due  within  two  years,  amounting  to  over  twelve  hundred  mil- 
lions of  dollars,  of  which  eight  hundred  and  thirty  millions 
were  ifotes  bearing  seven  and  three  tenths  per  cent,  interest 
and  over  one  hundred  and  thirty  millions  bearing  six  per  cent, 
interest  then  due  or  payable  on  ten  days*  notice.  In  his  anxiety 
to  restore  specie  payments  by  retiring  greenbacks,  he  forgot 
the  issues  of  suspended  bank  paper  then  extant,  of  which 
there  was  at  that  time  sixty-five  millions  of  old  State  bank 
notes  still  afloat;  they  probably  belonged  to  the  "flexible" 
part  of  the  currency. 

According  to  him,  it  was  not  safe  to  trust  the  Treasury  or 
the  people  with  the  control  of  the  currency,  but  such  control 
ought  to  be  vested  in  banks  with  power  to  make  the  currency 


138  AMERICAN     MONEY. 

flexible,  expanding  and  contracting  as  in  former  times  when 
panics  were  periodical.  The  officers  of  such  banks,  forsooth, 
would  make  the  currency  fluctuate  according  to  the  require- 
ments of  legitimate  business:  they  would  not  discount  a  note, 
no  matter  how  well  secuied,  if  the  money  was  to  be  used  for 
speculation, — of  course  not:  they  never  did  !  ! 

This  "flexible"  doctrine  used  in  favor  of  banks  of  issue  is 
totally  refuted  by  the  facts.  The  currency  for  a  number  of 
years  past  has  consisted  of  coin,  coin  certificates,  a  fixed 
amount  of  greenbacks  and  a  declining  amount  of  National 
bank  notes.  And  money  was  never  before  so  abundant  or 
interest  so  low.  In  times  past  when  banks  of  issue  con- 
trolled the  currency,  they  kept  tension  enough  on  the  so- 
called  "  elasticity  "  to  maintain  high  rates  of  interest  at  all 
seasons  of  the  year.  This  is  the  banking  idea  of  a  proper 
elasticity.  An  elastic  and  palpitating  currency  is  no  more 
needed  than  an  elastic  and  variable  standard. 

Mr.  McCulloch,  in  his  report  as  Secretary,  of  December  5, 
1866,  expressed  regret  that  he  had  not  been  allowed  to  redeem 
greenbacks  faster,  and  said:  The  increase  of  National  bank 
circulation  has  kept  pace  with  the  decrease  of  United  States 
notes  which,  as  legal  tender,  he  called  a  false  and  demoralizing 
standard.  He  was  not  unmindful  of  the  saving  which  re- 
sulted to  the  government  by  the  use  of  its  own  currency,  but  this 
was  more  than  overcome  by  the  discredit  arising  from  failing 
to  pay  the  notes  according  to  their  tenor  and  its  bad  influence 
on  the  public  morals.  This  objection  to  greenbacks  on  ac- 
count of  their  immoral  tendency  sounds  well,  coming  from 
an  advocate  of  State  banks  who  had  not  redeemed  their  notes 
since  1861  and  of  a  National  bank  system  which  had  never 
redeemed  its  notes  at  all.  It  'never  seemed  to  occuFto  the 
Secretaiy  that  his  administration  through  the  Treasury  of  a 
National  free  banking  system  of  suspended  and  inconvertible 
bank  notes  had  an  immoral  tendency.  The  withdrawal  of 
the  bank  notes  would  have  restored  specie  payments  as  fast 
as  the  withdrawal  of  greenbacks.  He  was  mindful  of  the 
saving  to  the  people  by  the  use  of  their  own  notes;  but  he  was 
more  mindful  of  bank  inflation.  After  the  floating  debt  was 
all  funded  except  the  greenbacks,  that  false  and  demoralizing 
standard  rapidly  approximated  towards  gold.  And  by  May 
31,  1878,  the  use  of  greenbacks  had  so  corrupted  the  public 


AMERICAN    MONEY.  139 

morals  that  pursuant  to  a  loud  call  to  that  effect  it  was  at 
that  date  enacted,  that  thereafter  it  should  not  be  lawful  for 
the  Secretary  of  the  Treasury  or  other  officer  to  cancel  or 
retire  any  more  United  States  notes  and  when  any  were  re- 
deemed or  received  they  should  be  reissued  and  kept  in  circu- 
lation. Their  amount  then  was,  and  still  is,  346,681,016. 

Hereafter  the  Government  can  furnish  all  the  money 
needed,  both  the  coin  and  paper.  The  sooner  the  national 
bank  notes  are  eliminated  from  the  currency  the  better;  it 
will  be  one  step  toward  a  more  simple  money  system.  And 
it  is  quite  apparent  from  the  foregoing  short  summary  of  past 
financial  history  that  banks  of  issue,  whether  State  or  National 
under  a  free  banking  or  any  other  system,  are  both  useless 
and  dangerous.  If  the  people  are  determined  to  have  infla- 
tion, the  government  printing  offices  can  furnish  a  sufficient 
supply  of  paper  money:  private  assistance  is  not  at  all  neces- 
sary. If  the  people  see  fit  to  wreck  the  currency  it  is  better 
for  them  to  do  it  with  their  own  notes.  Some  time  or  other, 
the  relation  existing  between  the  money  unit  and  the  quantity 
of  money  will  be  fully  understood  and  regarded. 

For  the  present,  the  programme  actually  adopted  is  paper 
money  backed  by  silver  as  well  as  the  public  faith.  Such  a 
currency  has  a  natural  limit.  The  objections  to  it  are  a 
probable  change  of  standard,  and  overloading  the  treasury 
with  such  a  vast  amount  of  silver. 


14  DAY  USB 

RETURN  TO  DESK  FROM  WHICH  BORROWED 

LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below,  or 

on  the  date  to  which  renewed. 
Renewed  books  are  subject  to  immediate  recall. 


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/TICAO  iA\^"cia                             University  ot  Uaiuornia 
(E1602slO)4/6B                                            Berkeley 

YB  60818 


